Word: seagram
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...lacks a music division, one of the entertainment industry's most reliable profit centers. One solution would be to acquire EMI, known for such performers as Garth Brooks and Sinead O'Connor. Or Murdoch might go after the 15% stake in Time Warner, worth about $2 billion, that the Seagram Co., which recently bought MCA and its Universal Studios, may be ready to unload. But another buyer for those shares, the phone giant AT&T, is rumored to be in talks with Time Warner...
Entertainment executives saw MCA as a smart buy for the 21st century: surely there are rosier prospects for software than for spirits. But Bronfman wasn't selling his whiskey interests; he was giving up on a company with a strong present (Du Pont stock accounted for nearly 70% of Seagram's pretax profits last year) and a robust future. Unsurprisingly, Wall Street greeted both the Du Pont sale and the MCA negotiations with derision. On Friday Moody's Investors Service announced that it was considering "the possible downgrade" of Seagram's debt. Seagram stock dropped nearly 17% during the week...
Close watchers of Seagram thought Bronfman got too little for his Du Pont stake. Says Ken Shea, an analyst at Standard & Poor's: "It doesn't make sense to dump a solid business like Du Pont, which throws off good dividends, and take on a much riskier investment in MCA. But then the press accounts of Edgar Jr. don't give him a lot of credit. They paint him as a Dan Quayle who is ready to wreck Seagram...
Bronfman could be Dan Quayle or Champale -- or something more potent, a strong successor to his father. Junior has cut costs, promoted such high-margin products as Martell Cognac and bought the Dole fruit-juice line to complement Tropicana. Seagram's profits doubled in 1994, to $734 million...
Freedom is exhilarating, and the movie business is intoxicating. Another whiskey merchant, Joseph P. Kennedy, thought so in 1928 when he briefly took over Patha pictures. Back then, Jules Stein, MCA's founder, was booking singers into speakeasies; and Sam Bronfman, the new owner of Seagram, was bootlegging spirits across the Canadian border into Prohibition-era America. Wall Street is hoping that for Seagram's sake, Sam's grandson Edgar Jr. does not forget the first rule of a speakeasy: the bartender is supposed to stay sober...