Seagram Co. Confirms Negotiations to Acquire MCA Inc. from Matsushita Electric Industrial Co.

Strategic Insights -

Seagram Co. has confirmed that it is in negotiations to acquire a majority of MCA Inc. from Matsushita Electric Industrial Co. for approximately $7 billion. If the deal is finalized, Seagram will become one of the world's leading entertainment conglomerates, with a portfolio of companies including Universal Studios, MCA Records, and theme parks. Edgar Bronfman Jr., the 39-year-old president of Seagram, will take the helm of the company, replacing Lew Wasserman and Sidney Sheinberg, who are expected to leave their positions.

Key Takeaways:

  • Seagram will acquire 80% of MCA Inc. from Matsushita Electric Industrial Co. for approximately $7 billion.
  • The deal will mark a significant expansion of Seagram's presence in the entertainment industry, with a portfolio of companies including Universal Studios, MCA Records, and theme parks.
  • Edgar Bronfman Jr., the 39-year-old president of Seagram, will take the helm of the company, with a stake of 36.4% controlled by his family.
  • Seagram has been trying to break into the entertainment industry for several years, and owns 14.9% of Time Warner Inc.
  • Seagram announced the DuPont deal after the stock market closed Thursday, retaining 8.2 million DuPont common shares or a stake of about 1.2%.
  • Cash flow at DuPont was $1.6 billion last year and is expected to reach $2 billion this year.
  • Seagram may also sell off its Time Warner block of 56.7 million shares, which would fetch approximately $2 billion at current market price.
  • Matsushita has been disappointed by MCA's profits, with estimated operating profit of $460 million on revenues of $4.6 billion last year.
  • MCA's future prospects have been clouded due to the departure of Steven Spielberg, who left to help form DreamWorks SKG with record mogul David Geffen and movie executive Jeffrey Katzenberg.

Statistics:

  • $7 billion: Estimated value of the Seagram-Matsushita deal.
  • 80%: Percentage of MCA Inc. that Seagram will acquire from Matsushita Electric Industrial Co.
  • 36.4%: Stake controlled by the Bronfman family in Seagram.
  • $61.625: Price of DuPont common stock after the Seagram deal was announced.
  • $1.6 billion: Cash flow at DuPont last year.
  • $2 billion: Expected cash flow at DuPont this year.
  • $2 billion: Estimated value of Seagram's Time Warner block of 56.7 million shares.
  • $460 million: Estimated operating profit of MCA Inc. last year.
  • $4.6 billion: Revenues of MCA Inc. last year.

Sources:

  • Seagram Co.
  • Matsushita Electric Industrial Co.
  • DuPont Co.
  • Time Warner Inc.
  • Oppenheimer & Co.
  • Creative Artists Agency
  • Michael Ovitz
  • Michael Douglas
  • Lew Wasserman
  • Sidney Sheinberg
  • Barry Diller
  • Steven Spielberg
  • David Geffen
  • Jeffrey Katzenberg
  • PolyGram NV
  • Philips Electronics NV.