<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 25, 1998
THE SEAGRAM COMPANY LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Canada 1-2275 None
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
1430 Peel Street, Montreal, Quebec, Canada H3A 1S9
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code:
(514) 849-5271
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
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. ("Pepsi") for cash proceeds of approximately $3.3
billion. Certain of the assets relating to the business of Tropicana which, in
the aggregate, are not material to Tropicana's business continue to be held by
affiliates of the Corporation, pending receipt of consents or approvals or
satisfaction of other applicable requirements necessary for the transfer of such
assets. The terms of the transaction were the result of arms-length negotiations
between the Corporation and Pepsi.
The proceeds from the transaction will be used by the Corporation to pay a part
of the cash portion of the purchase price for the previously announced
acquisition of PolyGram N.V. ("PolyGram") described below.
The foregoing description of the Tropicana transaction is not intended to be
complete and is qualified in its entirety by reference to the Stock Purchase
Agreement among the Corporation, Seagram Enterprises, Inc. and Pepsi, which is
incorporated by reference herein.
Item 5. Other Events.
On June 22, 1998, the Corporation announced that it had signed definitive
agreements with Koninklijke Philips Electronics N.V. ("Philips") and PolyGram to
acquire PolyGram. The transaction, which is subject to the receipt of certain
regulatory approvals, is scheduled to close in the second quarter of the
Corporation's fiscal year ending June 30, 1999.
The pro forma financial statements filed herewith give effect to the sale of
Tropicana, the acquisition of PolyGram and certain other transactions. The pro
forma financial statements should be read in conjunction with the historical
financial statements of the Corporation and Polygram. Incorporated by reference
herein are the following historical financial statements of Polygram: (i) the
audited consolidated balance sheets of PolyGram as of December 31, 1997 and
1996, and the related consolidated statements of income, consolidated statements
of cash flows and consolidated statements of changes to shareholders' equity for
each of the three years ended December 31, 1997 (the "Audited Financial
Statements") and the report of KPMG Accountants N.V. thereon (the "Report") and
(ii) the unaudited consolidated interim financial reports of PolyGram for the
six months ended June 30, 1998 and June 30, 1997 (the "Unaudited Interim
Financial Reports").
2
<PAGE> 3
Item 7. Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
(1) 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.
(c) Exhibits
(2) Stock Purchase Agreement dated as of July 20, 1998 among the
Corporation, Seagram Enterprises, Inc. and PepsiCo, Inc.
(incorporated by reference to Exhibit 2 to the Corporation's
Form 8-K dated July 20, 1998).
(23) Consent of KPMG Accountants N.V., independent auditors.
(99.1) PolyGram Audited Financial Statements and Report (incorporated
by reference to PolyGram's Annual Report on Form 20-F for the
year ended December 31, 1997).
(99.2) Polygram Unaudited Interim Financial Reports (incorporated by
reference to PolyGram's Report on Form 6-K dated July 22,
1998).
(99.3) Press Release.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE SEAGRAM COMPANY LTD.
(Registrant)
Date: September 8, 1998
By: /s/ Neal B. Cravens
----------------------------------
Neal B. Cravens
Senior Vice President, Finance
4
<PAGE> 5
THE SEAGRAM COMPANY LTD
CURRENT REPORT ON FORM 8-K
Index to Financial Statements
Unaudited Pro Forma Financial Information of The Seagram Company Ltd.:
Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1998
Unaudited Pro Forma Consolidated Income Statement for the Fiscal Year
Ended June 30, 1998.
5
<PAGE> 6
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 subject to the receipt of certain regulatory approvals and
is expected to close in the second quarter of the Corporation's fiscal year
ending June 30, 1999. In connection with the PolyGram transaction, the
Corporation has agreed to make 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 following Unaudited Pro Forma Consolidated Balance Sheet as of June 30,
1998 and Unaudited Pro Forma Consolidated Statement of Income for the fiscal
year ended June 30, 1998 illustrate (i) the effect of the sale of Tropicana and
the Offer as if such transactions had been consummated on June 30, 1998 for the
Unaudited Pro Forma Consolidated Balance Sheet and (ii) the effect of the sale
of Tropicana, the Offer and the other transactions described below as if each
had been consummated on July 1, 1997 for the Unaudited Pro Forma Consolidated
Statement of Income. For purposes of the following unaudited pro forma financial
statements, the total purchase price of the Offer of NLG 20.7 billion is
converted to US Dollars at a rate of 2.00 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:
- 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"); and
- 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.
No adjustment has been included in the pro forma amounts for any
anticipated cost savings or other synergies.
These Unaudited Pro Forma Consolidated Financial Statements should be read
in conjunction with (i) the historical financial statements of PolyGram
contained in PolyGram's Annual Report on Form 20-F for the year ended December
31, 1997 which is incorporated by reference herein, (ii) the PolyGram unaudited
consolidated interim financial data contained in PolyGram's Report on Form 6-K
dated July 22, 1998, which is incorporated by reference herein and (iii) the
historical financial statements of the Corporation included in its Current
Report on Form 8-K dated September 1, 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.
6
<PAGE> 7
THE SEAGRAM COMPANY LTD. AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
(UNITED STATES DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
TROPICANA POLYGRAM POLYGRAM SEAGRAM
SEAGRAM PRO FORMA FINANCIAL PRO FORMA CONSOLIDATED
HISTORICAL ADJUSTMENTS STATEMENTS(F) ADJUSTMENTS PRO FORMA
---------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and short-term investments at
cost................................... $ 1,174 $3,269(a) $ 119 $ 5,207(g) $ 1,419
(8,350)(h)
Receivables, net......................... 2,155 -- 1,010 -- 3,165
Inventories.............................. 2,555 -- 135 -- 2,690
Film costs, net of amortization.......... 175 -- 204 -- 379
Deferred income taxes.................... 282 -- 181 -- 463
Prepaid expenses and other current
assets................................. 630 -- 572 (188)(i) 1,014
------- ------ ------ ------- -------
TOTAL CURRENT ASSETS................... 6,971 3,269 2,221 (3,331) 9,130
------- ------ ------ ------- -------
Common stock of DuPont...................... 1,228 -- -- 1,228
Common stock of USAi........................ 306 -- 306
Film costs, net of amortization............. 1,272 333 -- 1,605
Artists' contracts, advances and other
entertainment assets..................... 761 1,116 2,800(j) 4,677
Property, plant and equipment, net.......... 2,733 394 -- 3,127
Investment in unconsolidated companies...... 3,437 105 -- 3,542
Excess of cost over fair value of assets
acquired................................. 3,076 1,056 6,695(j) 10,827
Deferred charges and other assets........... 661 58 -- 719
Net assets of discontinued Tropicana
operations............................... 1,734 (1,734)(b) -- --
------- ------ ------ ------- -------
$22,179 $1,535 $5,283 $ 6,164 $35,161
======= ====== ====== ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings and indebtedness
payable within one year................ $ 1,653 $ 325 $ 1,707(k) $ 3,685
Accrued royalties and participations..... 702 610 -- 1,312
Payables and accrued liabilities......... 2,068 172(c) 1,310 95(i) 3,645
Income and other taxes................... 286 80(d) 84 -- 450
------- ------ ------ ------- -------
TOTAL CURRENT LIABILITIES.............. 4,709 252 2,329 1,802 9,092
------- ------ ------ ------- -------
Long-term indebtedness...................... 2,225 73 3,500(l) 5,798
Accrued royalties and participations........ 421 153 -- 574
Deferred income taxes....................... 2,598 261 1,064(j) 3,923
Other credits............................... 995 229 -- 1,224
Minority interest........................... 1,915 36 -- 1,951
Shareholders' equity
Shares without par value................. 848 2,202 (2,202)(m) 2,848
2,000(n)
Cumulative currency translation
adjustments............................ (499) -- (499)
Cumulative gain on equity securities
after tax.............................. 699 -- 699
Retained earnings........................ 8,268 1,283(e) -- 9,551
------- ------ ------ ------- -------
TOTAL SHAREHOLDERS' EQUITY............. 9,316 1,283 2,202 (202) 12,599
------- ------ ------ ------- -------
$22,179 $1,535 $5,283 $ 6,164 $35,161
======= ====== ====== ======= =======
</TABLE>
7
<PAGE> 8
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)
<TABLE>
<CAPTION>
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(V) STATEMENTS(W) ADJUSTMENTS PRO FORMA
---------- -------- ------ --------- -------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ 9,714 $(394)(o) $26(p) $9,351 $5,559 $14,910
5(q)
Cost of revenues........ 5,630 (247)(o) 5,383 3,045 $ 332(x) 8,760
Selling, general and
administrative
expenses.............. 3,576 (87)(o) 8(q) 3,498 2,167 169(y) 5,834
1(r)
------- ----- --- ------ ------ ------ ------- -------
Operating income........ 508 (60) 22 470 347 (501) 316
Interest, net and
other............... (1,058) (38)(o) 21(s) (1,075) 14 332(z) (729)
------- ----- --- ------ ------ ------ ------- -------
1,566 (22) 1 1,545 333 (833) 1,045
Provision (benefit)
for income taxes.... 638 (14) 3(t) 627 102 (242)(t) 487
Minority interest
charge (credit)..... 48 (10)(o) 6(u) 44 11 (36)(u) 19
------- ----- --- ------ ------ ------ ------- -------
Income (loss) from
continuing
operations.......... $ 880 $ 2 $(8) $ 874 $ 220 $ (555) $ 539
Income from
discontinued
Tropicana
operations, after
tax................. 66 -- -- 66 $ (66) -- -- --
------- ----- --- ------ ------ ------ ------- -------
Net income (loss)....... $ 946 $ 2 $(8) $ 940 $ (66) $ 220 $ (555) $ 539
======= ===== === ====== ====== ====== ======= =======
Basic earnings per share
Income from continuing
operations.......... $ 2.51 $ 1.36
Income from
discontinued
Tropicana
operations, after
tax................. .19 --
------- -------
Net income............ $ 2.70 $ 1.36
======= =======
Diluted earnings per
share
Income from continuing
operations.......... $ 2.49 $ 1.34
Income from
discontinued
Tropicana
operations, after
tax................. .19 --
------- -------
Net income............ $ 2.68 $ 1.34
======= =======
Shares (in thousands)
Weighted average
shares
outstanding......... 349,874 47,904(n) 397,778
Dilutive potential
common shares....... 3,731 3,731
------- -------
Adjusted weighted
average shares
outstanding......... 353,605 401,509
======= =======
</TABLE>
8
<PAGE> 9
NOTES TO SEAGRAM PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(a) Reflects the proceeds from the sale of Tropicana, which are subject to
adjustment based upon a final determination of net indebtedness as of the
closing date.
(b) Reflects the disposal of Tropicana net assets.
(c) Reflects transaction fees and other incremental costs related to the sale of
Tropicana.
(d) Reflects the income tax expected to be paid on the sale of Tropicana.
(e) Reflects the net gain after tax on the sale of Tropicana.
(f) 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 2.0341
Dutch Guilders to 1.0 US Dollar.
(g) Reflects the cash proceeds from short term borrowings and long term
borrowings.
(h) Reflects the cash paid to PolyGram shareholders in the Offer.
(i) Reflects hedging, financing and transaction costs incurred as a result of
the Offer.
(j) 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.
(k) Reflects the short-term borrowings to finance the Offer.
(l) Reflects the long-term borrowings to finance the Offer.
(m) Reflects the elimination of historical PolyGram equity.
(n) Reflects the issuance of 47,904,191 Seagram Shares at $41.75 per share to
PolyGram shareholders in the Offer.
(o) Reflects the elimination of USA Networks and the television business
contributed to the LLC.
(p) Reflects the 45.8% equity in the net income of the LLC.
(q) 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.
(r) Reflects the amortization of goodwill on the investment in the LLC over 40
years.
(s) 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%.
(t) Reflects the income taxes provided for at the statutory income tax rate.
(u) Reflects the adjustment of interest attributable to minority shareholders of
Universal.
(v) Reflects the removal of Tropicana net income.
(w) The PolyGram financial statements for 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 2.01812 Dutch
Guilders to one US Dollar for the twelve months ended June 30, 1998.
(x) Reflects the amortization, 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 (j).
(y) 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 (j).
(z) Reflects the additional interest expense resulting from the increased
short-term borrowings of approximately $1,707 million at an average
borrowing rate of 5.6% and increased long-term borrowings of $3.5 billion at
an average borrowing rate of 6.75% 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 of $3.15 billion from the sale of Tropicana as described in notes
(a) and (b).
9
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------ ----------------------
<S> <C>
(2) Stock Purchase Agreement dated as of July 20, 1998 among the
Corporation, Seagram Enterprises, Inc. and Pepsi (incorporated by
reference to Exhibit 2 to the Corporation's Form 8-K dated July
20, 1998).
(23) Consent of KPMG Accountants N.V., independent auditors.
(99.1) PolyGram Audited Financial Statements and Report (incorporated by
reference to PolyGram's Annual Report on Form 20-F for the year
ended December 31, 1997).
(99.2) PolyGram Unaudited Interim Financial Reports (incorporated by
reference to PolyGram's Report on Form 6-K dated July 22, 1998).
(99.3) Press Release.
</TABLE>
10
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to incorporation by reference in the Prospectuses constituting part
of the Registration Statement on Form S-4 (333-61535), Registration Statements
on Form S-3 (Numbers 2-99681, 33-42959, 33-42877, 33-67772, 333-4134 and
333-4136) and the Registration Statements on Form S-8 (Numbers 33-27194,
33-2043, 33-49096, 33-60606, 33-99122 and 333-19059) of The Seagram Company Ltd.
of our Report dated February 11, 1998, relating to the Consolidated Balance
Sheets of PolyGram N.V. as of December 31, 1996 and 1997, and the related
Consolidated Statements of Income, Consolidated Statements of Cash Flows and
Consolidated Statements of Changes in Shareholders' Equity for each of the years
in the three-year period ended December 31, 1997 of PolyGram N.V., appearing in
the Annual Report on Form 20-F of PolyGram N.V. for the year ended December 31,
1997.
/s/ KPMG Accountants N.V.
---------------------------
KPMG Accountants N.V.
Amsterdam, The Netherlands,
September 4, 1998
11
<PAGE> 1
Exhibit 99
SEAGRAM COMPLETES SALE OF TROPICANA TO PEPSICO FOR
US$3.3 BILLION IN CASH
August 25, 1998
Seagram announced today that it has completed the sale of Tropicana Products,
Inc. to PepsiCo, for $3.3 billion in cash.
As stated on July 20, the proceeds from the transaction will be used by Seagram
to pay a part of the cash portion of the purchase price for the acquisition of
PolyGram, currently scheduled to close in the fourth quarter of this calendar
year.
12
