Shares of Seagram Co. dropped 10% Monday as investors’ hopes faded that the entertainment and spirits conglom will be sold anytime soon.
The stock fell $5.38 to close at $48.94, well off its 52-week high of $65.25 reached earlier this year when takeover speculation was at its height. The shares were trading as low as $36.63 last fall.
Similarly, heavy sell-offs hit Rupert Murdoch’s News Corp, which fell almost 14%. The conglom lost almost $6.6 billion in value on Monday, hit by a global sell-off of tech stocks and news that Murdoch himself was being treated for prostate cancer.
Although never confirming the talks, Seagram and its CEO, Edgar Bronfman Jr., had broached the possibility of a deal with a number of suitors, including France’s Vivendi, owner of Canal Plus, as well as News Corp. and Disney.
But no announcement was forthcoming and speculation has largely died down, leading many to assume no major news was on the way. The stock, however, still held a bit of a takeover premium — whether it was five points, or more than that, will become evident in coming trading sessions.
Package deal only
At issue was Bronfman’s desire to sell the entire company instead of breaking out entertainment assets like Universal Studios as separate components. That means a buyer would also have to take on the giant wine and spirits business.
In recent months, however, analysts noted that tax considerations would make it all but impossible for Bronfman to break up Seagram.
Bronfman’s desire to keep a top post in any new enterprise has also been a stumbling block.
A story Monday in the Wall Street Journal, which prompted the move in Seagram stock, said a merger with Vivendi/Canal remained the likeliest combination if any were to occur, with about a 50-50 chance of going through.
Seagram’s downdraft came on a day when showbiz stocks were generally mixed to higher as financial markets emerged from last week’s technology-led sell-off and Friday’s utter rout.
Merger partners Time Warner and America Online, which now trade in tandem, were among the sector’s biggest winners.
Time Warner rose 4.2% to close at $84.63; AOL was up 5.1% to $57.81.
The Dow ended the day up 217.87 points to close at 10,582.51
(Marc Graser contributed to this report.)