-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CjQtYIYLCpwn8KP2RK8Cqxgz96L/iqrDXPBBWVuyLubuq+qm3NvXUR4BfEpLN8E8 UEmcbUEG6AFk/LO/H09YiA== 0000950123-98-010314.txt : 19981126 0000950123-98-010314.hdr.sgml : 19981126 ACCESSION NUMBER: 0000950123-98-010314 CONFORMED SUBMISSION TYPE: SC 14D1/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19981125 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: POLYGRAM N V CENTRAL INDEX KEY: 0000823197 STANDARD INDUSTRIAL CLASSIFICATION: PHONOGRAPH RECORDS & PRERECORDED AUDIO TAPES & DISKS [3652] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A SEC ACT: SEC FILE NUMBER: 005-54789 FILM NUMBER: 98759822 BUSINESS ADDRESS: STREET 1: GERRIT VAN DER VEENLAAN 4 CITY: 3743 DN BAARN THE NE STATE: P7 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SEAGRAM CO LTD CENTRAL INDEX KEY: 0000088188 STANDARD INDUSTRIAL CLASSIFICATION: BEVERAGES [2080] IRS NUMBER: 000000000 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 14D1/A BUSINESS ADDRESS: STREET 1: 1430 PEEL ST STREET 2: H3A 1S9 CITY: MONTREAL QUEBEC CANA STATE: A8 BUSINESS PHONE: 5148495271 MAIL ADDRESS: STREET 1: C/O JOSEPH E SEAGRAM & SONS INC STREET 2: 375 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10152 SC 14D1/A 1 AMENDMENT NO. 1 ON SCHEDULE 14D-1 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 1 TO SCHEDULE 14D-1 ------------------------ TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ POLYGRAM N.V. (NAME OF SUBJECT COMPANY) ------------------------ THE SEAGRAM COMPANY LTD.-- LA COMPAGNIE SEAGRAM LTEE. (BIDDER) ------------------------ SHARES, PAR VALUE NLG 0.50 PER SHARE (TITLE OF CLASS OF SECURITIES) ------------------------ XS1139843 (CUSIP NUMBER OF CLASS OF SECURITIES) ------------------------ ROBERT W. MATSCHULLAT JOSEPH E. SEAGRAM & SONS, INC. 375 PARK AVENUE NEW YORK, NEW YORK 10152 (212) 572-7000 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER) ------------------------ COPIES TO: GEORGE R. KROUSE, JR., ESQ. JOHN G. FINLEY, ESQ. SIMPSON THACHER & BARTLETT 425 LEXINGTON AVENUE NEW YORK, NEW YORK 10017 (212) 455-2000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 This Amendment No. 1 amends and supplements the Tender Offer Statement on Schedule 14D-1 filed with the Securities and Exchange Commission on November 4, 1998 (as amended and supplemented, the "Schedule 14D-1") relating to the offer by The Seagram Company Ltd., a corporation organized under the laws of Canada ("Seagram"), upon the terms and subject to the conditions set forth in the Offering Circular/ Prospectus dated November 4, 1998 (the "Offering Circular/Prospectus") and in the related Letter of Transmittal/Election Form or Application Form/Deed of Transfer, as applicable (collectively, as any of the foregoing may be further amended or supplemented from time to time, the "Offer"), to acquire all issued shares, par value NLG 0.50 per share ("PolyGram Shares"), of PolyGram N.V., a corporation incorporated under the laws of the Netherlands ("PolyGram"), not already owned by Seagram or its affiliates for, at the election of each holder of PolyGram Shares, per share consideration of either (i) 1.3772 common shares without nominal or par value of Seagram (the "Share Consideration") or (ii) NLG 115, net to the seller in cash (the "Cash Consideration"); provided, that Share Consideration shall be paid in respect of 34,783,758 PolyGram Shares and Cash Consideration shall be paid in respect of all other tendered PolyGram Shares. Unless otherwise indicated, all capitalized terms used but not defined herein shall have the meanings assigned thereto in the Offering Circular/Prospectus. THE SCHEDULE 14D-1 IS HEREBY AMENDED AND SUPPLEMENTED AS FOLLOWS: ITEM 2. IDENTITY AND BACKGROUND. Item 2 of the Schedule 14D-1 is hereby amended and supplemented as follows: On November 16, 1998, Frank J. Biondi, Jr. resigned as a Director of Seagram and as Chairman and Chief Executive Officer of Universal. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. Item 3 of the Schedule 14D-1 is hereby amended and supplemented as follows: On November 10, 1998, Seagram entered into an Acquisition Agreement among Seagram, PolyGram and Orion Pictures Library Acquisition Co., Inc., an indirect subsidiary of Metro-Goldwyn-Mayer Inc. ("MGM"), with respect to its previously announced agreement in principle to sell certain film library assets of PolyGram's film division to a subsidiary of MGM following Seagram's acquisition of PolyGram. The purchase price for the transaction is approximately $250 million, with $235 million to be paid in cash at the closing of such transaction and the remaining estimated $15 million to be paid from operating cash flow from the assets prior to the expected closing of the transaction on December 31, 1998. The transaction is subject to the consummation of the Offer, the receipt of regulatory approvals and other customary closing conditions. Discussions with other parties regarding the sale of certain other library assets of PolyGram's film division have taken place, and Seagram is continuing to examine strategic alternatives regarding the film division's production and distribution operations. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Item 4 of the Schedule 14D-1 is hereby amended and supplemented as follows: The information set forth in response to Item 3 above in this Amendment to the Schedule 14D-1 is incorporated herein by reference. On November 20, 1998, Joseph E. Seagram & Sons, Inc., an Indiana corporation and an indirect wholly-owned subsidiary of Seagram ("JES"), issued $500,000,000 in aggregate principal amount of 8% Senior Quarterly Income Debt Securities due 2038 ("QUIDS(SM)"). The QUIDS are unsecured debt obligations of JES and are guaranteed as to payment of principal and interest by Seagram. The QUIDS will mature on December 31, 2038. Interest on the QUIDS is payable quarterly on each March 31, June 30, September 30 and December 31, commencing December 31, 1998. The QUIDS are redeemable at the option of JES, in whole or in part, on or after November 20, 2003 at 100% of the principal amount redeemed together with accrued interest to the redemption date. - --------------- QUIDS(SM) is a service mark of Goldman, Sachs & Co. 2 3 The net proceeds to JES of the QUIDS offering are estimated to be approximately $484,250,000, before expenses. JES will lend the net proceeds from the sale of the QUIDS to certain of its affiliates to finance in part the acquisition of PolyGram Shares pursuant to the Offer. The underwriters have exercised their option to purchase an additional $50,000,000 in principal amount of QUIDS at the initial public offering price plus accrued interest from November 20, 1998, less the underwriting discount. For a further description of the terms of the QUIDS, reference is made to (i) the Pricing Agreement, dated November 13, 1998 between JES and Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Painewebber Incorporated, Prudential Securities Incorporated and Salomon Smith Barney Inc., as representatives of the several underwriters named therein (the "Pricing Agreement"), which Pricing Agreement is incorporated herein by reference as new Exhibit 11(b)(1) to the Schedule 14D-1, and (ii) the Indenture, dated as of September 15, 1991 among JES, Seagram and The Bank of New York, as Trustee (the "Indenture"), which Indenture is incorporated herein by reference as new Exhibit 11(b)(2) to the Schedule 14D-1. The foregoing description does not purport to be complete and is qualified in its entirety by reference to the text of the Pricing Agreement and the Indenture. ITEM 5. PURPOSE OF THE OFFER AND PLANS OR PROPOSALS OF THE BIDDER. Item 5 of the Schedule 14D-1 is hereby amended and supplemented as follows: The information set forth in response to Item 3 above in this Amendment to the Schedule 14D-1 is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. Item 9 of the Schedule 14D-1 is hereby amended and supplemented as follows: The unaudited pro forma financial information contained in new Exhibit 11(g)(1) to the Schedule 14D-1 and the unaudited supplementary pro forma financial information contained in new Exhibit 11(g)(2) to the Schedule 14D-1 are incorporated herein by reference. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. Item 11 is hereby amended and supplemented to add the following: (b)(1) Pricing Agreement, dated November 13, 1998 between Joseph E. Seagram & Sons, Inc. and Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Painewebber Incorporated, Prudential Securities Incorporated and Salomon Smith Barney Inc., as representatives of the several underwriters named therein (incorporated by reference to Exhibit 99.2 of the Current Report on Form 8-K of The Seagram Company Ltd. dated November 20, 1998). (b)(2) Indenture, dated as of September 15, 1991 among Joseph E. Seagram & Sons, Inc., The Seagram Company Ltd. and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4(g) of the Current Report on Form 8-K of The Seagram Company Ltd. dated November 8, 1991, as amended). (g)(1) The Seagram Company Ltd. -- Unaudited Pro Forma Financial Information. (g)(2) The Seagram Company Ltd. -- Unaudited Supplementary Pro Forma Financial Information. 3 4 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. THE SEAGRAM COMPANY LTD. By: /s/ ROBERT W. MATSCHULLAT ------------------------------------ Name: Robert W. Matschullat Title: Vice Chairman and Chief Financial Officer Date: November 25, 1998 4 5 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - --------- ----------- 11(b)(1) Pricing Agreement, dated November 13, 1998 between Joseph E. Seagram & Sons, Inc. and Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, PaineWebber Incorporated, Prudential Securities Incorporated and Salomon Smith Barney Inc., as representatives of the several underwriters named therein (incorporated by reference to Exhibit 99.2 of the Current Report on Form 8-K of The Seagram Company Ltd. dated November 20, 1998). 11(b)(2) Indenture, dated as of September 15, 1991 among Joseph E. Seagram & Sons, Inc., The Seagram Company Ltd. and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4(g) of the Current Report on Form 8-K of The Seagram Company Ltd. dated November 8, 1991, as amended). 11(g)(1) The Seagram Company Ltd. -- Unaudited Pro Forma Financial Information. 11(g)(2) The Seagram Company Ltd. -- Unaudited Supplementary Pro Forma Financial Information.
EX-99.11.G.1 2 UNAUDITED PRO FORMA FINANCIAL INFORMATION 1 EXHIBIT 11(g)(1) THE SEAGRAM COMPANY LTD. UNAUDITED PRO FORMA FINANCIAL INFORMATION On August 25, 1998, The Seagram Company Ltd. (the "Corporation") completed the sale of Tropicana Products, Inc. and the Corporation's global juice business ("Tropicana") to PepsiCo, Inc. for cash proceeds of approximately $3.3 billion. The proceeds from the Tropicana sale will be used by the Corporation to provide part of the financing for the Corporation's acquisition of PolyGram N.V. ("PolyGram") which is expected to close in December 1998. In connection with the PolyGram transaction, the Corporation has commenced an offer (the "Offer") to acquire all issued shares, par value NLG 0.50 per share ("PolyGram Shares"), of PolyGram for per share consideration, at the election of each holder of PolyGram Shares, of either (i) 1.3772 common shares without nominal or par value ("Seagram Shares") of the Corporation (the "Share Consideration") or (ii) NLG 115, net to the seller in cash (the "Cash Consideration"); provided, that Share Consideration shall be paid in respect of 34,783,758 PolyGram Shares and Cash Consideration shall be paid in respect to all other tendered PolyGram Shares. The Offer is subject to several customary conditions, including that at least 95 percent of PolyGram's issued share capital be tendered and the absence of defined materially adverse changes or events. The Offer and withdrawal rights will expire on December 4, 1998, unless extended. The following Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 1998 and Unaudited Pro Forma Consolidated Statements of Income for the three months ended September 30, 1998 and for the fiscal year ended June 30, 1998 illustrate (i) the effect of the Offer as if it had been consummated on September 30, 1998 for the Unaudited Pro Forma Consolidated Balance Sheet and (ii) the effect of the sale of Tropicana and the Offer as if each had been consummated on July 1, 1997 for the Unaudited Pro Forma Consolidated Statement of Income for the three months ended September 30, 1998 and (iii) the effect of the sale of Tropicana, the offer and the other transactions described below as if such transactions had been consummated on July 1, 1997 for the Unaudited Pro Forma Consolidated Statement of Income for the fiscal year ended June 30, 1998. For purposes of the following Unaudited Pro Forma Consolidated Financial Statements, the total purchase price of the Offer of NLG 20.7 billion is converted to US Dollars at a rate of 2.0 Dutch Guilders to 1.0 US Dollar, the payment of which is reflected as Cash Consideration of $8.35 billion and the issuance of 47,904,191 Seagram Shares valued at $2.0 billion (assuming that all PolyGram Shares are acquired in the Offer). The Offer will be accounted for as a purchase. The other transactions referred to in the immediately preceding paragraph are: - On October 21, 1997, the acquisition by Universal Studios, Inc. ("Universal") of an incremental 50% interest in the USA Networks partnership, including the Sci-Fi Channel, for $1.7 billion in cash (the "USA Networks Transaction"). The USA Networks Transaction was accounted for under the purchase method of accounting. The cost of the acquisition was allocated on the basis of the estimated fair market value of the assets acquired and liabilities assumed. This valuation resulted in $1.6 billion of unallocated excess of cost over fair value of assets acquired which was being amortized over 40 years, and - On February 12, 1998, the sale of a 50% interest in USA Networks to USA Networks, Inc. ("USAi") and the contribution of the remaining 50% interest in USA Networks and the majority of the television assets ("UTV") of Universal, including all of Universal's domestic television production and distribution operations and 50% of the international operations of USA Networks, to USANi LLC (the "LLC") in a transaction (the "USAi Transaction") in which Universal received cash, 13.5 million shares of USAi (after giving effect to the 2 for 1 split of USAi stock on March 26, 1998), consisting of approximately 7.1 million shares of common stock and 6.4 million shares of Class B common stock which in the aggregate represented a 10.7% equity interest in USAi at date of acquisition, and a 45.8% interest in the LLC which is exchangeable for USAi common stock and Class B common stock. The USAi Transaction resulted in $82 million of unallocated excess cost over fair value of assets acquired which is being amortized over 40 years. The investment in 7.1 million shares of USAi common stock held by Universal at September 30, 1998 is accounted for at market value ($138 million at September 30, 1998) and has an underlying historical cost of $142 million. The investment in the 6.4 million shares of Class B common stock of USAi is carried at its historical cost of $128 million. The investment in the LLC is included in investments in unconsolidated companies on the consolidated balance sheet and is accounted for under the equity method. No adjustment has been included in the pro forma amounts for any anticipated cost savings or other synergies. Pursuant to the agreement relating to the acquisition of PolyGram, PolyGram has retained a financial advisor for the purpose of selling PolyGram's film division as promptly as practicable. On November 10, 1998, Seagram and PolyGram entered into an agreement with a subsidiary of Metro-Goldwyn-Mayer Inc. ("MGM") with respect to the previously announced agreement in principle to sell certain library assets of PolyGram's film division to a subsidiary of MGM following Seagram's acquisition of PolyGram. Discussions with other parties regarding the sale of certain other library assets of PolyGram's film division have taken place, and Seagram is continuing to examine strategic alternatives regarding the film division's production and distribution operations. No adjustment has been included in the pro forma amounts for any sale of PolyGram film division assets. These Unaudited Pro Forma Consolidated Financial Statements should be read in conjunction with (i) the historical financial statements of PolyGram (including the notes thereto) contained in PolyGram's Annual Report on Form 20-F for the year ended December 31, 1997; (ii) the PolyGram unaudited consolidated interim financial data contained in PolyGram's Reports on Form 6-K dated July 22, 1998 and October 21, 1998, which are incorporated by reference herein,(iii) the historical financial statements of Seagram contained in Seagram's Annual Report on Form 10-K for the fiscal year ended June 30, 1998, as amended and (iv) the historical unaudited consolidated financial statements of Seagram contained in Seagram's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998. The Unaudited Pro Forma Consolidated Financial Statements are presented for comparative purposes only and are not intended to be indicative of actual consolidated results of operations or consolidated financial position that would have been achieved had the sale of Tropicana, the Offer, the USA Networks Transaction and the USAi Transaction been consummated as of the dates indicated above nor do they purport to indicate results which may be attained in the future. 2 THE SEAGRAM COMPANY LTD. AND SUBSIDIARY COMPANIES UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998 (UNITED STATES DOLLARS IN MILLIONS)
POLYGRAM POLYGRAM SEAGRAM SEAGRAM FINANCIAL PRO FORMA CONSOLIDATED HISTORICAL STATEMENTS(a) ADJUSTMENTS PRO FORMA ---------- ------------- ----------- ------------ ASSETS Current assets Cash and short-term investments at cost................................... $ 3,753 $ 98 $5,207(b) $ 708 (8,350)(c) Receivables, net......................... 2,216 1,268 -- 3,484 Inventories.............................. 2,734 154 -- 2,888 Film costs, net of amortization.......... 304 194 -- 498 Deferred income taxes.................... 294 216 -- 510 Prepaid expenses and other current assets................................. 683 528 (188)(d) 1,023 ------- ------ ------- ------- TOTAL CURRENT ASSETS................... 9,984 2,458 (3,331) 9,111(k) ------- ------ ------- ------- Common stock of DuPont...................... 925 -- -- 925 Common stock of USAi........................ 266 -- -- 266 Film costs, net of amortization............. 1,292 315 -- 1,607 Artists' contracts, advances and other entertainment assets..................... 860 1,265 2,800(e) 4,925 Property, plant and equipment, net.......... 2,759 405 -- 3,164 Investment in unconsolidated companies...... 3,836 69 -- 3,905 Excess of cost over fair value of assets acquired................................. 3,109 1,060 6,544(e) 10,713 Deferred charges and other assets........... 651 68 -- 719 ------- ------ ------- ------- $23,682 $5,640 $ 6,013 $35,335(k) ======= ====== ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Short-term borrowings and indebtedness payable within one year................ $ 1,820 $ 482 $ 707(f) $ 3,009 Accrued royalties and participations..... 738 911 -- 1,649 Payables and accrued liabilities......... 2,043 1,037 95(g) 3,175 Income and other taxes................... 525 47 -- 572 ------- ------ ------- ------- TOTAL CURRENT LIABILITIES.............. 5,126 2,477 802 8,405(k) ------- ------ ------- ------- Long-term indebtedness...................... 2,266 76 4,500(h) 6,842 Accrued royalties and participations........ 453 187 -- 640 Deferred income taxes....................... 2,541 271 1,064(e) 3,876 Other credits............................... 1,044 242 -- 1,286 Minority interest........................... 1,923 34 -- 1,957 Shareholders' equity Shares without par value................. 859 2,353 (2,353)(i) 2,859 2,000(j) Cumulative currency translation adjustments............................ (382) -- -- (382) Cumulative gain on equity securities after tax.............................. 477 -- -- 477 Retained earnings........................ 9,375 -- -- 9,375 ------- ------ ------- ------- TOTAL SHAREHOLDERS' EQUITY............. 10,329 2,353 (353) 12,329 ------- ------ ------- ------- $23,682 $5,640 $ 6,013 $35,335 ======= ====== ======= =======
2 3 THE SEAGRAM COMPANY LTD. AND SUBSIDIARY COMPANIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 (UNITED STATES DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA ADJUSTMENTS ------------------------------------------- POLYGRAM SEAGRAM SEAGRAM TROPICANA FINANCIAL POLYGRAM CONSOLIDATED HISTORICAL ADJUSTMENTS STATEMENTS(l) ADJUSTMENTS PRO FORMA ---------- ----------- ------------- ----------- ----------- Revenues...................... $ 2,247 $1,343 $ 3,590 Cost of revenues.............. 1,282 741 $ 83(m) 2,106 Selling, general and administrative expenses.................... 786 533 41(n) 1,360 ------- ------ ------- ------- Operating income.............. 179 69 (124) 124(k) Interest, net and other..................... 41 11 90(o) 142 ------- ------ ------- ------- 138 58 (214) (18) Provision (benefit) for income taxes.......... 87 (11) (64)(p) 12 Minority interest charge (credit)........... 6 (4) (6)(q) (4) Equity earnings (loss) from unconsolidated companies................... 50 (2) -- 48 ------- ------ ------- ------- Income (loss) from continuing operations................ $ 95 $ 71 $ (144) $ 22 Discontinued Tropicana operations: Loss from discontinued operations (net of taxes of $0) (3) 3 (r) -- -- -- Gain on sale of discontinued operations (net of taxes of $373)................. 1,072 (1,072)(s) -- -- -- ------- ------- ------- ------- ------- 1,069 (1,069) -- -- -- ------- ------- ------ ------- ------- Net income (loss)............. $ 1,164 $(1,069) $ 71 $ (144) $ 22(k) ======= ======= ====== ======= ======= Basic earnings per share Income from continuing operations................ $ .27 $ .06 Income from discontinued Tropicana operations, after tax....................... 3.08 -- ------- ------- Net income.................. $ 3.35 $ .06 ======= ======= Diluted earnings per share Income from continuing operations................ $ .27 $ .06 Income from discontinued Tropicana operations, after tax....................... 3.06 -- ------- ------- Net income.................. $ 3.33 $ .06 ======= ======= Shares (in thousands) Weighted average shares outstanding............... 347,360 47,904(j) 395,264 Dilutive potential common shares............. 2,593 2,593 ------- ------- Adjusted weighted average shares outstanding............... 349,953 397,857 ======= =======
3 4 THE SEAGRAM COMPANY LTD. AND SUBSIDIARY COMPANIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE FISCAL YEAR ENDED JUNE 30, 1998 (UNITED STATES DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA ADJUSTMENTS PRO FORMA ADJUSTMENTS ----------------- -------------------------------------------- UTV AND SEAGRAM/ POLYGRAM SEAGRAM SEAGRAM USA USAI & USAI TROPICANA FINANCIAL POLYGRAM CONSOLIDATED HISTORICAL NETWORKS OTHER PRO FORMA ADJUSTMENTS(r) STATEMENTS(l) ADJUSTMENTS PRO FORMA ---------- -------- ------ --------- -------------- ------------- ----------- ------------ Revenues................ $ 9,474 $(376)(t) $ 11(v) $9,109 $5,559 $14,668 Cost of revenues........ 5,525 (232)(t) 5,293 3,045 $ 347(m) 8,685 Selling, general and administrative expenses.............. 3,396 (53)(t) 8(v) 3,351 2,156 169(n) 5,676 ------- ----- ---- ------ ------ ------ ------- ------- Operating income........ 553 (91) 3 465 358 (516) 307(k) Interest, net and other............... 228 (38)(t) 21(w) 211 14 360(o) 585 Gain on sale of Time Warner shares......... 926 -- -- 926 926 Gain on USAi transaction........... 360 -- -- 360 360 ------- ----- ---- ------ ------ ------ ------- ------- 1,611 (53) (18) 1,540 344 (876) 1,008 Provision (benefit) for income taxes.... 638 (14) 3(p) 627 102 (258)(p) 471 Minority interest charge (credit)..... 48 (10)(t) 6(q) 44 11 (35)(q) 20 Equity (loss) earnings from unconsolidated companies............. (45) 31(t) 19(u) 5 (11) (6) ------- ----- ---- ------ ------ ------ ------- ------- Income (loss) from continuing operations.......... $ 880 $ 2 $ (8) $ 874 $ 220 $ (583) $ 511 Income from discontinued Tropicana operations, after tax................. 66 -- -- 66 $ (66) -- -- -- ------- ----- ---- ------ ------ ------ ------- ------- Net income (loss)....... $ 946 $ 2 $ (8) $ 940 $ (66) $ 220 $ (583) $ 511(k) ======= ===== ==== ====== ====== ====== ======= ======= Basic earnings per share Income from continuing operations.......... $ 2.51 $ 1.28 Income from discontinued Tropicana operations, after tax................. .19 -- ------- ------- Net income............ $ 2.70 $ 1.28 ======= ======= Diluted earnings per share Income from continuing operations.......... $ 2.49 $ 1.27 Income from discontinued Tropicana operations, after tax................. .19 -- ------- ------- Net income............ $ 2.68 $ 1.27 ======= ======= Shares (in thousands) Weighted average shares outstanding......... 349,874 47,904(j) 397,778 Dilutive potential common shares....... 3,731 3,731 ------- ------- Adjusted weighted average shares outstanding......... 353,605 401,509 ======= =======
4 5 NOTES TO SEAGRAM PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (a) The PolyGram financial statements have been converted to U.S. GAAP and certain reclassifications have been made to conform to Seagram's account classifications. The balance sheet has been converted at a rate of 1.8794 Dutch Guilders to 1.0 US Dollar. (b) Reflects the cash proceeds from short term borrowings and long term borrowings. (c) Reflects the cash paid to PolyGram shareholders in the Offer. (d) Reflects option premiums for the purchase of various currency options to hedge Seagram's currency exposure given that the cash consideration payable in the Offer is payable in Dutch Guilders. Seagram has purchased options to sell $6.8 billion in exchange for Deutsch Marks, which are being used as a proxy for Dutch Guilders due to the greater liquidity available in the German currency, at strike prices equivalent to the forward rates at the times of purchase. These options mature on various dates near the expected close of the Offer. (e) Reflects preliminary estimates of the revaluation of artist contracts, catalogs and music publishing to fair value and the associated deferred tax liability and the unallocated amount of the excess of the purchase price over the fair value of PolyGram assets acquired. Seagram is currently evaluating the fair value of certain assets to be acquired and liabilities to be assumed. Upon completion of this valuation, Seagram will make a final allocation of the excess purchase price over fair value, which may include adjustments to the preliminary estimates referenced above. Accordingly, the purchase accounting allocation is preliminary and has been made solely for the purpose of developing the unaudited pro forma consolidated financial information. (f) Reflects the short-term borrowings to finance the Offer. (g) Reflects financing and transaction costs incurred as a result of the Offer. (h) Reflects the long-term borrowings to finance the Offer. (i) Reflects the elimination of historical PolyGram equity. (j) Reflects the issuance of 47,904,191 Seagram Shares at $41.75 per share to PolyGram shareholders in the Offer. (k) Includes PolyGram's film division balances which represent approximately five percent of Seagram pro forma current assets, approximately two percent of Seagram pro forma total assets, approximately five percent of Seagram pro forma current liabilities and approximately two percent of Seagram pro forma total liabilities. The operating loss and net loss for PolyGram's film division for the three months ended September 30, 1998 were $38 million and $48 million, respectively. The operating loss and net loss for PolyGram's film division for the twelve months ended June 30, 1998 were $102 million and $150 million, respectively. (l) The PolyGram financial statements for the three months ended September 30, 1998 and the twelve months ended June 30, 1998 have been converted to U.S. GAAP and certain reclassifications have been made to conform to Seagram's account classifications. The income statement has been converted to US Dollars at an average rate of 1.9868 Dutch Guilders to one US Dollar for the three months ended September 30, 1998, and at an average rate of 2.01812 Dutch Guilders to one US Dollar for the twelve months ended June 30, 1998. (m) Reflects the amortization, on an accelerated basis over periods from 14 to 20 years, of the $2.8 billion revaluation to fair value of artist contracts, catalogs and music publishing assets as described in note (e). Amortization for the fiscal years ending June 30, 1999, June 30, 2000, June 30, 2001 and June 30, 2002 will be $332 million, $228 million, $198 million and $183 million, respectively. (n) Reflects the amortization, over a 40 year period, of the unallocated amount of the excess of the purchase price over the fair value of PolyGram assets acquired as described in note (e). (o) Reflects the additional interest expense resulting from the increased short-term borrowings of approximately $707 million at an average borrowing rate of 6.28% and increased long-term borrowings of $4.5 billion at an average borrowing rate of 7.02% for the payment of $8.35 billion of the $10.35 billion purchase price to acquire 100% of PolyGram in the Offer. The balance of the $8.35 billion payment will be funded from the net sale proceeds from the sale of Tropicana. (p) Reflects the income taxes provided for at the statutory income tax rate. (q) Reflects the adjustment of interest attributable to minority shareholders of Universal. (r) Reflects the removal of Tropicana net income. (s) Reflects the removal of the gain on the sale of Tropicana. (t) Reflects the elimination of USA Networks and the television business contributed to the LLC. The initial 50% interest was accounted for under the equity method of accounting, while the acquisition of the remaining 50% interest was accounted for under the purchase method of accounting. (u) Reflects the 45.8% equity in the net income of the LLC net of the amortization of goodwill on the investment in the LLC over 40 years. The interest in the LLC is accounted for under the equity method of accounting. (v) Reflects distribution agreements which principally include: (1) USAi's distribution of Universal's library and other television product and theatrical films in domestic television markets and (2) Universal's distribution of USAi's television product in foreign markets. (w) Reflects the additional interest expense resulting from the increased short-term borrowings for the payment of $1.7 billion for the incremental 50% interest in USA Networks offset by the reduction of short-term borrowings using cash proceeds of $1.3 billion from the USAi transaction, at an average borrowing rate of 5.4%. 5 EX-99.11.G.2 3 UNAUDITED SUPPLEMENTARY PRO FORMA FINANCIAL INFO 1 EXHIBIT 11(g)(2) THE SEAGRAM COMPANY LTD. UNAUDITED SUPPLEMENTARY PRO FORMA FINANCIAL INFORMATION The following unaudited supplementary pro forma financial information of The Seagram Company Ltd. (the "Corporation" or "Seagram") is intended solely to provide investors with additional data and should be read in conjunction with (i) the unaudited pro forma consolidated balance sheet as of June 30, 1998 and unaudited pro forma consolidated income statement for the fiscal year ended June 30, 1998 included in the Corporation's Form 8-K dated August 25, 1998, as amended, and (ii) the unaudited pro forma consolidated balance sheet as of September 30, 1998 and unaudited pro forma consolidated income statement for the three months ended September 30, 1998 included in the Corporation's Form 8-K dated November 24, 1998. The unaudited supplementary pro forma financial information which follows includes revenues and earnings before interest, taxes, depreciation and amortization of the Corporation and its consolidated subsidiaries ("EBITDA"). EBITDA is a non-GAAP financial metric utilized by management and is intended solely to provide additional information to investors. The Corporation believes EBITDA provides additional information for understanding its underlying business results. The Corporation also believes EBITDA is an appropriate measure of the Corporation's operating performance, given the goodwill associated with the Corporation's acquisitions. However, EBITDA should be considered in addition to, not as a substitute for, reported revenues, operating income, net income, cash flows and other measures of financial performance in accordance with generally accepted accounting principles. The unaudited supplementary pro forma financial information for the fiscal year ended June 30, 1998 illustrates the effect of the proposed acquisition of PolyGram N.V. (the "Acquisition") and the other transactions referred to below as if such transactions had been consummated on July 1, 1997. The unaudited supplementary pro forma financial information for the three months ended September 30, 1998 illustrates the effect of the Acquisition as if the Acquisition had been consummated on July 1, 1997. For purposes of the following unaudited supplementary pro forma financial information, the total purchase price of the Acquisition of Dutch Guilders 20.7 billion is converted to U.S. dollars at a rate of 2.0 Dutch Guilders to 1.0 U.S. dollar, the payment of which is reflected as cash consideration of $8.35 billion and the issuance of 47,904,191 common shares of the Corporation valued at $2.0 billion (assuming that all PolyGram shares are acquired in the Acquisition). The Acquisition will be accounted for as a purchase. The other transactions referred to in the immediately preceding paragraph are: - on October 21, 1997, the acquisition by Universal Studios, Inc. ("Universal") of an incremental 50% interest in the USA Networks partnership (the "USA Networks transaction"), including the Sci-Fi Channel, for $1.7 billion in cash. The USA Networks transaction was accounted for under the purchase method of accounting. The cost of the acquisition was allocated on the basis of the estimated fair market value of the assets acquired and liabilities assumed. This valuation resulted in $1.6 billion of unallocated excess of cost over fair value of assets acquired which was being amortized over 40 years, and - on February 12, 1998, the sale of a 50% interest in USA Networks to USA Networks, Inc. ("USAi") and the contribution of the remaining 50% interest in USA Networks and the majority of the television assets ("UTV") of Universal, including all of Universal's domestic television production and distribution operations and 50% of the international operations of USA Networks, to USANi LLC in a transaction (the "USA transaction") in which Universal received cash, 13.5 million shares of USAi (after giving effect to the 2 for 1 split of USAi stock on March 26, 1998), consisting of approximately 7.1 million shares of common stock and 6.4 million shares of Class B common stock which, as of the date of acquisition, in the aggregate represented a 10.7% equity interest in USAi, and a 45.8% interest in the USANi LLC which is exchangeable for USAi common stock and Class B common stock. The USAi transaction resulted in $82 million of unallocated excess cost over fair value of assets acquired which is being amortized over 40 years. The investment in the 7.1 million shares of USAi common stock held by Universal at September 30, 1998 is accounted for at market value ($138 million at September 30,1998) and has an underlying historical cost of $142 million. The investment in the 6.4 million shares of Class B common stock of USAi is carried at its historical cost of $128 million. The investment in the USANi LLC is included in investments in unconsolidated companies on the consolidated balance sheet and is accounted for under the equity method. No adjustment has been included in the pro forma amounts for any anticipated cost savings or other synergies. Pursuant to the agreement relating to the acquisition of PolyGram, PolyGram has retained a financial advisor for the purpose of selling PolyGram's film division as promptly as practicable. On November 10, 1998, Seagram and PolyGram entered into an agreement with a subsidiary of Metro-Goldwyn-Mayer Inc. ("MGM") with respect to the previously announced agreement in principle to sell certain library assets of PolyGram's film division to a subsidiary of MGM following Seagram's acquisition of PolyGram. Discussions with other parties regarding the sale of certain other library assets of PolyGram's film division have taken place, and Seagram is continuing to examine strategic alternatives regarding the film division's production and distribution operations. No adjustment has been included in the pro forma amounts for any sale of PolyGram film division assets. The unaudited supplementary pro forma financial information of the Corporation is presented for comparative purposes only and is not intended to be indicative of actual consolidated results of operations or consolidated financial position that would have been achieved had the Acquisition, the USA Networks transaction and the USAi transaction been consummated as of the dates indicated above nor does it purport to indicate results which may be attained in the future. 2 THE SEAGRAM COMPANY LTD. AND SUBSIDIARY COMPANIES UNAUDITED SUPPLEMENTARY PRO FORMA FINANCIAL INFORMATION For the Fiscal Year Ended June 30, 1998 (United States dollars in millions)
Pro Forma Pro Forma Adjustments Adjustments ------------------ --------------------------------- UTV and Seagram/ PolyGram Seagram Seagram USA USAi & USAi Financial PolyGram Consolidated Historical Networks Other Pro Forma Statements(c), (d) Adjustments Pro Forma ---------- -------- ------ --------- ----------------- ----------- ------------ Revenues Spirits and Wine.............. $4,525 $ -- $ -- $4,525 -- -- $ 4,525 Entertainment Filmed Entertainment....... 2,793 (376)(a) 11(b) 2,428 -- -- 2,428 Music...................... 1,461 -- -- 1,461 5,559 -- 7,020 Recreation and Other....... 695 -- -- 695 -- -- 695 ------ ----- ---- ------ ------ ----- ------- Total Entertainment........... 4,949 (376) 11 4,584 5,559 -- 10,143 Total Revenues................... $9,474 $(376) $ 11 $9,109 $5,559 $ -- $14,668 ====== ===== ==== ====== ====== ===== ====== EBITDA Spirits and Wine .............. $ 583 $ -- $ -- $ 583 -- -- $ 583 Entertainment Filmed Entertainment ........ 316 (115)(a) 3(b) 204 -- -- 204 Music 84 -- -- 84 540 -- 624 Recreation and Other ........ 99 -- -- 99 -- -- 99 ------ ----- ---- ------ ------ ----- ------- Total Entertainment............ 499 (115) 3 387 540 -- 927 Total EBITDA .................... 1,082 (115) 3 970 540 -- 1,510 Depreciation and Amortization ... 416 (24)(a) -- 392 182 516(e) 1,090 Corporate Expenses .............. 113 -- -- 113 -- -- 113 ------ ----- ---- ------ ------ ----- ------- Operating Income ................ $ 553 $ (91) $ 3 $465 $358 $(516) $ 307 ====== ===== ==== ====== ====== ===== ======
3 THE SEAGRAM COMPANY LTD. AND SUBSIDIARY COMPANIES UNAUDITED SUPPLEMENTARY PRO FORMA FINANCIAL INFORMATION For the Quarter Ended September 30, 1998 (United States dollars in millions)
Pro Forma Adjustments ------------------------------ PolyGram Seagram Seagram Financial PolyGram Consolidated Historical Statements(c),(d) Adjustments Pro Forma ---------- ----------------- ----------- ------------ Revenues Spirits and Wine $ 1,021 -- -- $ 1,021 Entertainment Filmed Entertainment 618 -- -- 618 Music 420 1,343 -- 1,763 Recreation and Other 188 -- -- 188 ---------- ---------- ----------- ------------ Total Entertainment 1,226 1,343 -- 2,569 Total Revenues $ 2,247 $ 1,343 $ -- $ 3,590 ========== ========== =========== ============ EBITDA Spirits and Wine $ 144 -- -- $ 144 Entertainment Filmed Entertainment 93 -- -- 93 Music 21 114 -- 135 Recreation and Other 34 -- -- 34 ---------- ---------- ----------- ------------ Total Entertainment 148 114 -- 262 Total EBITDA 292 114 -- 406 Depreciation and Amortization 101 45 124(e) 270 Corporate Expenses 12 -- -- 12 ---------- ---------- ----------- ------------ Operating Income $ 179 $ 69 $ (124) $ 124 ========== ========== =========== ============
4 NOTES TO SEAGRAM UNAUDITED SUPPLEMENTARY PRO FORMA FINANCIAL INFORMATION (a) Reflects the elimination of USA Networks and the television business contributed to the LLC. The initial 50% interest was accounted for under the equity method of accounting, while the acquisition of the remaining 50% interest was accounted for under the purchase method of accounting. (b) Reflects distribution agreements which principally include: (1) USAi's distribution of Universal's library and other television product and theatrical films in domestic television markets and (2) Universal's distribution of USAi's television product in foreign markets. (c) The PolyGram financial statements for the twelve months ended June 30, 1998 and three months ended September 30, 1998 have been converted to U.S. GAAP and certain reclassifications have been made to conform to Seagram's account classifications. The income statements has been converted to US Dollars at an average rate of 2.01812 Dutch Guilders to one US Dollar for the twelve months ended June 30, 1998 and at an average rate of 1.9868 Dutch Guilders to one US Dollar for the three months ended September 30, 1998. (d) Includes PolyGram's film division operating results for the twelve months ended June 30, 1998 and the three months ended September 30, 1998, respectively. (e) Reflects the amortization, on an accelerated basis over periods from 14 to 20 years, of the $2.8 billion revaluation to fair value of artist contracts, catalogs and music publishing assets as described in note (e). Amortization for the fiscal years ending June 30, 1999, June 30, 2000, June 30, 2001 and June 30, 2002 will be $332 million, $228 million, $198 million and $183 million, respectively. The amortization, over a 40 year period, of the unallocated amount of the excess of the purchase price over the fair value of PolyGram assets. -----END PRIVACY-ENHANCED MESSAGE-----