Edgar's Exit Strategy

If Seagram CEO Edgar Bronfman Jr. ever sweated, he was cool enough to do it in private. Since the mid-1990s, the part-time songwriter labored to turn his family's booze empire into a global entertainment giant. First, he invested in Time Warner, then acquired Universal Studios and finally gobbled up PolyGram, the world's largest music company--for a total investment of $19 billion. But Time Warner denied him a board seat and Universal released a string of box-office bombs. Lately such Internet buccaneers as Napster have threatened the music business, and Bronfman's rivals, especially the looming behemoth AOL Time Warner, have cast an ominous shadow over his company.

As the temperature was rising outside the company, things were also getting uncomfortable on the inside for Bronfman, whose family owns 24 percent of Seagram. His Uncle Charles had agreed to his nephew's Hollywood incursion out of family loyalty, but afterward he sold part of his Seagram stake. His sale was widely seen as a vote of low confidence, although he said it was for financial-planning purposes. NEWSWEEK has learned other relatives have been quietly fretting about the uncertain dividend payments that the hit-driven entertainment industry produces. That uncertainty means they may eventually have to sell shares in the company to finance their lifestyle, according to a source close to the family.

More haunting, a hostile raid on Seagram loomed as a possibility. Earlier this year, sources told NEWSWEEK, buyout kings Blackstone Group and Henry Kravis were approached by prominent entertainment executives about backing a bid for Seagram. And a top media-industry investment manager, Gordon Crawford, tried repeatedly to persuade Viacom CBS boss Sumner Redstone to acquire Seagram, according to people close to the matter. All the parties declined to comment or couldn't be reached. Bronfman, feeling the mounting pressure, had to find a graceful way out.

Last week he finally moved closer to a solution. After months of denial, Seagram confirmed it is in talks to be acquired by Vivendi, a French company with vast ambitions. Vivendi has a huge municipal-water-supply business, and it controls Canal Plus, a big French media company that would be part of the deal. If completed, the deal would create a New Economy global media giant with $65 billion in annual revenues. The two sides are loudly trumpeting potential synergies. Next week, for instance, Vivendi will help launch Vizzavi (as in "vis-a-vis"), the first Pan-European Internet portal that--if the Seagram deal closes--could deliver rapper Eminem, a Universal Music Group act, to 80 million people via TV or mobile phones.

For Bronfman, the transaction represents a face-saving end to his Hollywood foray. On the day before Bronfman became Seagram CEO in 1994, the company's stock closed at about $30. Since then, Seagram stock has doubled, but the S&P 500 has nearly tripled. Vivendi's offer is valued at nearly $80 a share, so if the deal closes, it would definitely improve Bronfman's scorecard. But significant hurdles remain. That's why Seagram's share price hasn't jumped to the proposed deal price. For one, Vivendi's shareholders are put off by the high price the company is offering for Seagram, and the French company's shares have fallen. There's also the thorny matter of Bronfman's role at the combined companies. As a condition for doing a deal, he has insisted on helping run the company. And if all that can be worked out, the jet-setting Bronfman, who'd answer to Vivendi's boss, Jean-Marie Messier, may find himself more at home in France than in Hollywood. Sounds like an ending right out of the movies.