Polygram deal close

$11 bil deal expected by Tuesday

NEW YORK — The Seagram board is expected to meet today or Tuesday, with its purchase of Polygram Holdings for about $11 billion appearing imminent.

But the prospect of rival bids still hasn’t been ruled out. The buyout group led by Michael Ovitz will make a decision today about whether to make an offer, sources said Sunday, and it is believed to have the funds available for a bid.

The status of the Jerry Perenchio bid was not clear Sunday.

Ovitz is teamed with leveraged buyout firms Forstmann Little and Thomas H. Lee & Co. Perenchio has backing from investment bank Donaldson Lufkin Jenrette and leveraged buyout firm Texas Pacific. Philips owns 75% of Polygram.

Last week, in a move to raise the selling price above a base estimated at $10 billion, Polygram’s board reportedly provided financial details to both new groups.

Polygram stock rose 6¢ Friday to close at $56.38, while Seagram rose 25¢ to close at $42.93.

Analysts continue to prefer the Seagram-Polygram link, which would transform Seagram into the world’s largest music company.

Polygram, with a roster that includes Elton John, Sheryl Crow and U2, controls 17% of the $40 billion global music business. If combined with Seagram’s burgeoning Universal Music Group, featuring Interscope, total music revenues would hover around $7 billion.

After merging Polygram’s music properties, Seagram could sell Polygram’s money-losing film business for as much as $1.5 billion. The consolidation of backroom functions, meanwhile, would generate annual savings of no less than $150 million.

The other bidders, by comparison, would be reliant on LBO money for as much as half their financing and on other sources for the remainder. Such investors generally prefer to cash out with above-market gains in about five years, thus raising questions as to whether a stand-alone Polygram could deliver the efficiencies necessary to produce LBO-worthy gains.

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