Euro ‘Gram Prix

Canal Plus, others show interest in PFE

NEW YORK — Seagram Co. Ltd. has yet to finalize its $11 billion acquisition of Polygram Holdings, but already the expectation that Seagram will unload the music giant’s film unit is stirring interest among possible buyers.

Among those expressing interest in buying Polygram Filmed Entertainment is Canal Plus, which wants to play a role in keeping PFE in European hands, according to Canal Plus chairman Pierre Lescure. Other European companies that may be interested, Wall Streeters say, include Bertelsmann, Pathe, Carlton Communications and possibly Pearson.

At the same time, Wall Streeters say several American companies would likely be interested in PFE, which has a film library of 1,500 titles.

Two thirds of those titles were acquired by Polygram in January when it paid $225 million for what was known as the Epic film library. Polygram beat out companies like Metro-Goldwyn-Mayer and Walt Disney Co. for the catalog, so it is likely that both would be interested in picking up the bigger library if it goes on the block. Neither MGM nor Disney would comment Wednesday.

Film expendable

Seagram, which will likely announce its acquisition of Polygram in the next few days, has made no comment on whether it would sell or keep the film side. But people close to the situation say Seagram CEO Edgar Bronfman Jr. is not as committed to film as he is to music, and would be open to selling PFE at the right price.

The right price for the whole group would be at least $1 billion, analysts say, out of the total value on Polygram of almost $11 billion.

It’s not clear whether or not the entire film group would be sold. Sources say Bronfman may be interested in keeping PFE’s successful labels like Working Title and selling the rest of the film unit, possibly even before Seagram completes its acquisition of Polygram.

Retention of Working Title would ensure the film group’s price would come down somewhat from the $1 billion valuation, although it would be still north of $500 million.

Euro option

European companies such as Canal Plus have a strong motivation to go after PFE, as they liked the idea of having one of the major film companies European-owned. Lescure highlighted this sentiment Wednesday in an interview with French newspaper Les Echoes, when he said, “Anyone who competes to stop Polygram Films from passing under American control deserves to be supported. We are ready to study a European solution if the opportunity of a separate sale is presented.”

People close to Lescure confirmed his comments Wednesday, but declined to elaborate on what sort of support Canal Plus may put up.

Deal under review

A tentative deal between Seagram and Polygram’s 75% shareholder Philips Electronics for acquisition of Polygram will be reviewed by Polygram’s board today, sources said. Assuming Polygram agrees, Seagram and Philips have to complete documentation of their deal before it is announced, and sources said that could occur anytime in the next few days.

Traders appear to believe the price is around $10.5 billion, as Polygram’s stock price has dipped in the past couple of days and closed down 56¢ to $55.18. Speculators who trade on takeover bids typically discount a bid price by about 12% on an annual basis, so the current stock price translates to an expected bid price of $58.50 or $10.5 billion.

Seagram’s stock price has also come down in the past few days, reflecting expectations that Seagram will use its stock as par-tial payment. Seagram closed down 31¢ to $40.93, from a high last week of $43.12.

(Michael Williams in Cannes contributed to this report.)

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