Canal Plus balks at price for Polygram distrib'n
French refuse to raise bid
The stumbling block, as ever, appears to be differences over price. Daily Variety understands that the pay television giant has bid $280 million for the assets, while Seagram is holding out for as much as $400 million.
Canal Plus came to the conclusion that it had reached its upper limit on Tuesday. Sources at the group's Paris headquarters told Daily Variety: "We have always said that we will not go above a certain price, and we've hit the ceiling."
Canal Plus' head of subsidiaries, Vincent Grimond, who has been leading the negotiations for the French side, would not be drawn on the state of the talks, and none of the players involved would comment on the exact amount offered by Canal Plus.
Informed sources say Canal Plus has become increasingly frustrated by the fact that while it has raised its offer over the past few weeks, Seagram Co., which is being advised by Goldman Sachs, has not budged.
While Seagram declined to comment, senior sources at its Universal Studios unit claimed that it was they, not Canal Plus, who had taken the initiative to end the talks.
Not over 'til it's over
While Canal Plus' withdrawal seems genuine, nobody is ruling out further developments involving the French. Observers point out that Metro-Goldwyn-Mayer backed away from done deals to acquire the majority of the PFE film library on several occasions before finally agreeing in October to pay $235 million for the 1,300 titles.
However, it appears that if Canal Plus and Seagram are to bridge the existing price difference, flexibility will have to come from the U.S. side, with the French refusing to dig any deeper into their pockets.
Canal Plus' interest in PFE revolves primarily around Polygram's European distribution operations, which cover 80% of the world in terms of revenues. Polygram has distrib outlets in the U.K., France, Germany, Benelux, Switzerland and Italy, and has a co-distribution agreement in Spain with Warner Sogefilms, in which Canal Plus has an indirect interest.
Looking to the future
Canal Plus has a distribution pact with French film group Pathe covering France (AMLF), Germany (Tobis) and the U.K. (Pathe). Most people have assumed that the Canal Plus/Pathe venture would be wound down if the Polygram deal went through. Canal Plus chairman Pierre Lescure has made no secret of his admiration for Polygram's video distribution.
Under its proposed deal with Seagram, Canal Plus would also get worldwide rights, outside the U.S., to all Polygram releases since March 31, 1996 (MGM bought all titles preceding that date). The French would feed these pics into their new Euro distribution pipeline, and sell them to other territories.
If Canal Plus' attempts to clinch a deal remain blocked, the question arises as to what Seagram will do with the remainder of PFE. The U.K.'s Carlton Communications has examined the assets but is not making an aggressive play for them at the moment.
The most favored theory doing the rounds is that Universal would retain PFE's production and distribution arms and exploit them itself.
UIP up in the air
U currently distributes outside the U.S. via distrib consortium United Intl. Pictures, to which it is committed through the end of 2001. If U were to keep Polygram's international distribution, that would offer an alternative distribution outlet to UIP, should it ever chose to quit.
Senior U sources stressed, however, that the studio has no plans to abandon UIP. Instead, they suggest, U could use the PFE infrastructure for the international distribution of smaller or specialized films which it identifies as being unsuitable for UIP.
While the industry awaits further developments on the distribution question, talks are continuing with Carlton to acquire the PFE-owned ITC library.
MGM passed on the ITC package, which contains some 200 films and a wad of television product. Observers believe that the asking price for ITC is somewhere between $125 million and $135 million.
If Seagram finds a buyer at that price, it will mean that it will have raised around $380 million from the total library sales. Seagram CEO Edgar Bronfman Jr. had been hoping to sell PFE for around $1 billion to help reduce the cost of his proposed $10.2 billion acquisition of PFE's parent Polygram Holdings. An asking price of $400 million for the distribution interests still leaves Seagram well short of Bronfman's target.
(Martin Peers in New York contributed to this report.)
