EMI Drops Bid for PolyGram Film Unit

EMI dropped out of the bidding for PolyGram Filmed Entertainment a day before the deadline, prompting speculation that Canada’s Seagram Co. may have a hard time getting the price it wants.

Britain’s largest music company was considered a contender for PolyGram, the maker of films including “Bean” and “Four Weddings and a Funeral.” Seagram wants to sell the unit to help offset the $10.4-billion cost of acquiring parent PolyGram, the world’s largest recorded-music company.

EMI’s withdrawal could mean that Seagram may have to lower the price of the unit, analysts said. The move is seen as positive for EMI, whose shares slid 7% the day it said it might bid, as investors balked at the risks of taking on an unprofitable film business.

“The market will breathe a sigh of relief for EMI,” said Nigel Reed, analyst at Paribas Capital Markets in London. “But it could make it more difficult for the seller to get a satisfactory price.”

An EMI spokesman declined to comment about the reasons for the company’s withdrawal.

Estimates for the price Seagram could get for the unit reach as high as $1 billion, though some analysts have contended the studio could sell for half as much.

France’s Canal Plus, Europe’s largest pay-television operator, also has expressed interest.

“It’s not just a question of buying PolyGram Filmed Entertainment, but having to invest another $300 million to $400 million in the business,” said Iek Van Cruyningen, an Enskilda Securities analyst. “That’s why buyers wouldn’t want to pay a lot.”

Other analysts said poor general market conditions may have been a factor in EMI’s decision to pull out of the bidding.

Metro-Goldwyn-Mayer Inc., the troubled Santa Monica-based movie and television studio is also considering a bid. U.S. movie companies Lakeshore Entertainment and Artisan Entertainment are also reportedly considering bids.

In July, PolyGram blamed part of an 85% drop in second-quarter net income on the film unit.