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Seagram, Polygram talks spin at 78 rpm

Deal would make U music group world's biggest

Talks between Seagram and Philips Electronics for the latter’s share of Polygram’s music and film outfit have been fast-tracked.

Insiders suggest a $10 billion deal in principle for Polygram could be reached by Memorial Day, though it may take months before a definitive agreement is hammered out.

A deal for Polygram would immediately transform the Seagram-owned Universal Music Group into the No. 1 record company in the world, with annual revenues just shy of $7 billion.

Spokesmen at both Polygram and Seagram remained tight-lipped Monday; Philips chairman Cor Boonstra took a plane to New York Monday.

Industry observers suggested that Polygram prexy/CEO Alain Levy — who was caught off-guard by Boonstra’s announcement that Polygram was in play — could be the first high-profile casualty of the deal.

Boonstra’s announcement last week was widely viewed as being both a blindside and a non-endorsement of Levy’s manage-ment style.

The fate of Polygram Filmed Entertainment prexy/CEO Michael Kuhn is also in doubt. Neither Levy nor Kuhn returned phone calls Monday.

However, PFE’s deals with production outfits Working Title and Interscope would likely survive a merger with Seagram’s Universal.

Interscope’s record operation has added to the bottom line of Seagram’s Universal Music Group. Interscope chiefs Ted Field and Jimmy Iovine have strong ties to both Universal studio and music group chieftains.

Privately, many of Polygram’s record label chiefs expressed concern about their futures, while publicly repeating that it’s busi-ness as usual.

Insiders agree that in the event of a merger there would not likely be more than 10 record labels under a UMG umbrella. Some of Polygram’s acts would likely be rolled onto Universal label rosters, a move which would cut overhead and streamline market-ing.

Some UMG label chiefs are already fantasizing about which acts on Polygram labels could be cherry-picked for their rosters.

And several Polygram label chiefs may get to test their golden parachutes if a deal with Seagram goes down.

Execs like Russell Simmons, who tops Def Jam Recordings and whose relationship with Polygram brass has been strained, will likely benefit from a Seagram deal.

Simmons and No. 2 exec Lyor Cohen have been negotiating with Polygram execs for a sale of the outstanding shares of their company.

Talks recently broke down, but Simmons, who was about to do battle to force a deal, is now lying low until the dust settles.

Danny Goldberg, who now heads Mercury Records Group and was a protege of UMG chairman/CEO Doug Morris, is widely expected to be kept aboard, given his close ties to UMG’s top ranks. MRG encompasses both the Mercury and Motown labels.

MCA Music Publishing, led by David Renzer, would remain the No. 3 publisher behind Warner Chappell and EMI even after it adds Polygram Music Publishing to its portfolio. The addition, however, would give MCA a strong international presence.

Universal’s film side would benefit from the addition of the hot indie Working Title, though chiefs Tim Bevan and Eric Fellner have not yet renewed their contracts with Polygram.

After their recent run of success, Bevan and Fellner could probably write their own deal with any studio in Hollywood, but they are understood to be adopting a wait-and-see policy.

They remain supporters of Polygram’s ambition to build a European-based film major, and are understood to be worried about the prospect of that vision getting lost.

Seagram’s shares closed up 2.6% Monday to $43.13, while Polygram closed at $52.13, a 5% gain.

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