Seagram Signs Deal to Buy 80% of MCA : Hollywood: Firm agrees to pay Matsushita $5.7 billion for controlling interest. Future of Wasserman, Sheinberg remains unclear.
Saying he is buying “one of only six major seats at the table,” beverage heir Edgar Bronfman Jr. ended his quest to acquire a Hollywood studio Sunday by agreeing to spend $5.704 billion for a controlling interest in entertainment conglomerate MCA Inc.
The negotiations between Bronfman, 39, and Japanese electronics giant Matsushita Electric Industrial, which started March 6 in Osaka, ended at 3:30 p.m. in the law offices of Shearman & Sterling on the 21st floor of the Citicorp Center building in Downtown Los Angeles. Bronfman, chief executive of Seagram Co., formally signed the agreement with Matsushita President Yoichi Morishita after the boards of both companies approved the deal.
For Matsushita, selling control of MCA ends a stormy, five-year marriage marked by an openly strained relationship with MCA Chairman Lew R. Wasserman, 82, and President Sidney J. Sheinberg, 60, the longest-running management team in Hollywood. That relationship worsened in the past week as Wasserman and Sheinberg deliberately were kept in the dark about the talks.
In a statement, Bronfman praised Wasserman and Sheinberg and said, “I look forward to working with them to shape the future direction of MCA.”
But in an interview with The Times, Bronfman stopped short of saying whether he would ask them to stay with the company after their contracts expire. He and his father, Edgar M. Bronfman, 65, planned to meet with Wasserman and Sheinberg today at MCA and said they spoke to the two executives by phone Sunday. Morishita also paid a visit to Wasserman’s home Sunday.
The deal, which is expected to close by June after some routine legal and financial reviews are made, gives Bronfman 80% of the company that owns Universal Pictures, MCA Music and the Universal Studios theme parks. It is one of the six major Hollywood studios, the others being Paramount Pictures, 20th Century Fox, Sony Pictures, Walt Disney and Warner Bros.
Bronfman called it “an extremely fair price” despite open reservations from some Seagram shareholders and suggestions in the financial press that he is a star-struck executive overpaying for entree into Hollywood.
“I have no personal interest in being a movie mogul. I have no intention of moving to Los Angeles,” Bronfman said.
Matsushita bought MCA in 1990 for $6.13 billion in cash and assumed $1 billion in debt, which was essentially the same value assigned to the company in Sunday’s agreement. Since then, the yen has strengthened so much against the dollar that Matsushita would have had to get $10 billion to match what it paid. Sources close to the company, however, said the company does not have to translate the dollars that it is getting from Seagram into yen immediately, and can postpone any loss it may take.
Matsushita’s goal was to mesh its consumer electronics business with the so-called “software” of Hollywood entertainment. MCA managers thought that Matsushita provided the kind of deep pockets that the company needed to make acquisitions and keep up with such media giants as Time Warner and Rupert Murdoch’s News Corp.
Instead, the two sides never meshed. Wasserman, Sheinberg and other MCA executives became disillusioned after Matsushita prevented the company from competing to acquire Virgin Records, join with ITT Corp. to bid on CBS and build Universal Studios Japan to their liking. Matsushita executives bristled when MCA executives went public last fall with their criticisms, an action virtually unheard of in Japanese corporate culture.
Responding to the consummation of the deal Sunday, MCA Motion Picture Group Chairman Tom Pollock said, “The dysfunctional relationship between ownership and management is over. We all hope the new ownership will bring a period of new growth to MCA.”
Wasserman, a Hollywood legend whose career dates back to the Great Depression, has a $1-million-a-year lifetime consulting agreement with MCA that was guaranteed to him when Matsushita bought the company. Sources said they expect that to remain in force whether or not he stays as chairman.
Reached at home Sunday, Wasserman declined comment.
Sheinberg, who was in his back yard blowing bubbles with his grandchildren, would only confirm that he and Wasserman were having lunch today at the studio with the Bronfmans.
Bronfman said that the intense MCA negotiations, occurring in only a few months, as well as firming up Seagram’s sale of $8.8 billion in DuPont stock back to the oil and chemical company last week, had left him no time to consider management questions.
Asked if he planned to keep both executives on, Bronfman said: “I don’t have an answer to the question because really I want to talk to them about what their vision for MCA is and to learn about their view about the growth and opportunities for MCA.”
Bronfman regretted that Wasserman and Sheinberg were angered by their exclusion from the talks, saying that he “regrets the unfortunate circumstances that required us to remain confidential with regard to the negotiations.”
Sources close to Matsushita and Seagram said that confidentiality was in both sides’ interests and would have been difficult to maintain had MCA executives been informed. Matsushita didn’t want the public embarrassment of a deal gone sour, while Seagram wanted to avoid starting an auction for MCA, which might have driven up the price, the sources said. Other companies, notably European entertainment giant PolyGram, were known to be interested.
In a statement, Matsushita said that the sale of MCA marked a return to its basic business of electronics. Sources close to the company added that Matsushita executives believe that they were under intense pressure to put their attention and resources into developing products to accommodate the coming digital communications revolution.
Bronfman said that the $5.7 billion that Seagram is paying represents 1 1/2 times MCA’s 1994 revenue and about 15 times the company’s estimated pretax earnings. Using those measurements, Bronfman said, he is paying less than what Viacom spent when it paid about $10 billion for Paramount Communications last year.
“This decision today stands on its own. It will be judged in five years or more. The only actions I take are actions that are in the best interests of the shareholders of the Seagram Co. It is a business decision, and I believe our shareholders will be well rewarded,” Bronfman said.
Speculation has been that Bronfman will be a hands-on owner. In the interview, however, he said he plans to spend a lot of time learning.
“I need to learn more about the entertainment business so I can discharge my responsibilities to our shareholders appropriately. To do that, I’m going to spend a fair amount of time out here trying to learn what it is I don’t know,” Bronfman said.
Bronfman first made his intentions to get into the entertainment business known two years ago when he accumulated nearly a 15% stake in Time Warner, which spurned him and never offered him a seat on its board of directors.
It is widely believed that Bronfman will sell that stake since Time Warner is a competitor of MCA. Bronfman said he hasn’t had time to consider what he will do.
“I will turn our attention to that in the next days and weeks,” he said.
Also unclear is whether MCA will be able to form any alliance with the new DreamWorks SKG studio founded by director Steven Spielberg, former Disney executive Jeffrey Katzenberg and music mogul David Geffen. Spielberg has been linked to the majority of MCA’s film hits for many years, either as director of such films as “Jurassic Park” and “Jaws” or in helping bring such productions as “The Flintstones” to the screen.
Bronfman said he is friends with Geffen, knows Katzenberg and looks forward to meeting with Spielberg.
But sources close to DreamWorks suggested that Time Warner, where the three have close ties to its Warner Bros. unit, would now be the front-runner for an alliance.