PolyGram chief Alain Levy resigned Monday after receiving an estimated $10-million buyout from PolyGram's parent corporation, Philips Electronics of the Netherlands, sources said.
The settlement comes after weeks of negotiations during which Levy had alleged that Philips breached his contract when it initiated negotiations to sell its 75% of PolyGram to Seagram Co. last month without his knowledge.
Philips announced Monday that it had signed a final agreement to sell PolyGram to Seagram and had reduced the purchase price from $10.6 billion to $10.4 billion. Seagram was able to shave $200 million off the price tag--paying $57 per share for PolyGram--because of weaker-than-expected performance during the current quarter, particularly in PolyGram's international operations.
Philips also announced that Levy will be replaced by PolyGram Chief Financial Officer Jan Cook, who will act as interim head of the corporation until the Seagram transaction is closed.
Despite the settlement, Levy is said to still be furious with Philips for the way the transaction was handled, sources said. Philips chief Cor Boonstra was in talks with Seagram for months before informing Levy of his plans on the May weekend before Seagram began its due diligence on PolyGram.
Levy, who ran PolyGram for seven years, has already had conversations with several of Seagram's competitors, including EMI Group Chairman Colin Southgate and Warner Music Group Co-Chairman Bob Daly, sources said. Levy's settlement does not bar him from hiring PolyGram executives in the near future--although most of the firm's senior managers are signed to multiyear contracts, sources said.
Levy joined PolyGram as head of its French music operation in 1984, taking over direct management of the company's U.S. operations in 1990. A year later, he became head of the entire global group.
He is credited with transforming the quiet, classical music company into a major competitor in the pop arena over the last decade by acquiring a handful of independent U.S. labels, including A&M;, Island, Motown and half of Def Jam. But Levy has been criticized for overpaying for those companies and interfering with the founders of such labels as A&M; and Island, ultimately driving them out of the PolyGram fold.
Seagram is expected to announce today that Doug Morris, who has headed Universal's music division since 1996, will take over as the future global chairman of the combined music entity after approval of the deal by government regulators.