Polygram probe looks unlikely

Date: 10/09/1998

By Chris Johnstone

EUROPEAN competition officials are likely to step back from launching an in-depth probe into Canadian multinational Seagram's 10-billion-ecu take-over of entertainment group PolyGram.

Industry insiders say the institution is unlikely to exercise its right to conduct a full-scale investigation even though the two companies have high national market shares for record sales in some EU countries.

“A second stage does not look on the cards,” said one industry source. “There is pressure to get this deal wrapped up.”

Seagram, whose empire covers drinks, film and record production and distribution and theme parks, launched a take-over bid for Dutch-based PolyGram, 75&percent; owned by electronics giant Philips, in May.

The combination of the two companies' music business was always the likeliest area to raise competition concerns, given that between them they enjoy market shares of around 40&percent; in France and 30&percent; in the UK and Germany.

However, officials are believed to think there is enough international competition in the volatile recording business to prevent the new music monolith from having a dominant position. PolyGram is reckoned to have around 17&percent; of the 40-billion-ecu-a-year turnover in the world-wide music industry.

National competition authorities, such as the UK's Office of Fair Trading, have also been examining this aspect of the deal. They can ask the Commission to take an extra two weeks to complete its preliminary investigation or call for aspects of the deal to be turned over to them for scrutiny.

Any possible problems over the film industry overlap between PolyGram Filmed Entertainment (PFE) and Seagram's stake in Universal/MCA have been effectively pre-empted by the Canadian company's desire to sell the PolyGram film unit.

PFE has proved that it can take on Hollywood by producing blockbuster hits. However, its new owners have decided that box office and critical success is not likely to be translated in the short term into profit.

EMI, Carlton Communications and Canal Plus have all been mentioned as possible bidders for Europe's only major film company.

Audio-visual and Culture Commissioner Marcelino Oreja made an unprecedented plea in July to Europe's cash-rich telecom companies to enter the bidding for PolyGram Filmed Entertainment.

Officials said this week that the Commissioner had not had a response from them and would not be taking any further action. “He will leave it now to market forces,” said spokesman Juan Roldan Ros.