According to American press reports, the investment group led by Michael Ovitz, a former Walt Disney president, has decided not to bid for Polygram. The Ovitz group, which comprised the leveraged buy-out firms Forstmann Little & Co and Thomas H Lee, is the second buyout team to drop out of the race after the withdrawal of a group led by Texas Pacific.
Industry sources now say Polygram - which owns the record labels behind acts such as U2 and Sheryl Crow and whose roster of artists includes Elton John, Bon Jovi and Luciano Pavarotti - will almost certianly fall to Seagram for a cash-and-shares offer worth around $10.5bn.
The board of Philips Electronics, which owns 75 per cent of Polygram, met last night to discuss Seagram's offer. Philips declined to comment yesterday on media speculation surrounding the deal.
Philips executives are understood to have met Edgar Bronfman, Seagram's chief executive, in New York last week. The Bronfman family owns a controlling 35 per cent stake in Seagram.
Rumours circulated that the Seagram board had met on Monday to discuss the bid and were considering combining an offer for Polygram with a sale of its Tropicana Beverage Group and its stake in Time Warner.
According to some sources, Seagram is considering spinning off its Tropicana fruit businesses through an initial public offer and selling its 11 million Time Warner shares to help fund its acquisition of Polygram.
Seagram wants to add Polygram, the world's largest record company with 17 per cent of the $40bn world market, to its Universal Music division. A deal would transform Seagram's music interests currently ranked sixth in the league of global music companies, behind companies such as PolyGram, Time Warner, EMI and Bertelsmann.
However, Universal Music still has an estimated market share of 6 per cent, prompting market specualtion that any deal could prompt competition concerns.
Seagram's interest in Polygram was sparked by Philips' declaration earlier this month that it was reviewing its stake in PolyGram. Last Thursday Philips confirmed it was talking to Seagram.
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