Universal Studios owner Seagram Co. is buying PolyGram NV, the world's biggest music company, for $10.6 billion and shedding its Tropicana juice business to make entertainment the main focus of a company best known for its whisky and vodka.
The widely expected deal, announced Thursday, adds PolyGram artists such as Elton John, Luciano Pavarotti, Nine Inch Nails and LL Cool J to Seagram's Universal Music Group, already home to stars including Bush, Reba McEntire, Erykah Badu and B.B. King.
It also allows Seagram to leapfrog competing conglomerates Time Warner Inc. and Sony Corp. in music while balancing its entertainment business amid a long box-office slump. For the first time, the majority of Seagram's business will be show business.
"These announcements herald an important transformation of Seagram," said Edgar Bronfman Jr., whose family built the famed liquor company that produces Seagram's V.O. and Chivas Regal whisky, Absolut vodka and Captain Morgan rum.
By acquiring PolyGram, Bronfman is striving to transform Seagram into an entertainment powerhouse in the same league as Walt Disney Co. and Time Warner.
The spirits scion forged into Hollywood three years ago, when he acquired 80 percent of MCA Inc. -- owner of Universal Studios -- for $5.7 billion, but has so far flopped at the box office.
Now, Bronfman is betting big time on the music business. Thursday's PolyGram deal creates the world's largest music company, with vast distribution overseas, prominent labels like Mercury, Motown and MCA, and some of the biggest selling artists in the music business.
For Philips, shedding PolyGram allows it to get out of the tumultuous music industry, which does not fit well with its core electronics business.
Wall Street analysts applauded the acquisition, citing the strategic fit of PolyGram and Seagram's own music company, Universal Music Group. Seagram closed up 3 3/4 at $44.75.
PolyGram is an international force, with 75 percent of its sales from overseas, while two-thirds of Universal's sales come from the United States.
"Strategically, the deal makes sense," said Salomon Smith Barney media analyst Jill Krutick. "It would elevate Seagram to an entertainment juggernaut and reduce its exposure to the film business."