<PAGE> 1
Filed by The Seagram Company Ltd.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: The Seagram Company Ltd.
Commission File No. 1-2275
and
Subject Company: Canal Plus S.A.
Commission File No. 82-2270
November 3, 2000
* * * * *
These materials may contain forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These statements are based on management's current expectations or beliefs
and are subject to a number of factors and uncertainties that could cause actual
results to differ materially from those described in the forward-looking
statements.
The forward-looking statements contained in these materials also address the
strategic business combination of Vivendi, Seagram and Canal+. The following
factors, among others, could cause actual results to differ materially from
those described in the forward-looking statements: the risk that the Vivendi,
Seagram and Canal+ businesses will not be integrated successfully; costs related
to the business combination; failure of the Vivendi, Seagram or Canal+
shareholders to approve the business combination; the risk that Seagram will be
unable to effect the disposition of its Spirits and Wine business or effect such
disposition on satisfactory terms and conditions; inability to further identify,
develop and achieve success for new products, services and technologies;
increased competition and its effect on pricing, spending, third-party
relationships and revenues; and the inability to establish and maintain
relationships with commerce, advertising, marketing, technology and content
providers. None of Vivendi, Seagram or Canal+ undertakes any obligation to
provide updates or to revise any forward-looking statements.
Investors and security holders are urged to read the joint proxy
statements/prospectus regarding the strategic business combination transaction,
which each of Vivendi Universal and Seagram has filed with the U.S. Securities
and Exchange Commission, because it contains important information. Investors
and security holders may obtain a free copy of the joint proxy
statement/prospectus and other documents filed by Vivendi, Seagram and Canal+
with the Commission at the Commission's website at www.sec.gov. The joint proxy
statement/prospectus and these other documents may also be obtained for free
from Seagram. Information regarding the participants in the proxy solicitation
and a description of their direct and indirect interests, by security holdings
or otherwise, is contained in the joint proxy statement/prospectus.
* * * * *
THE FOLLOWING IS A TRANSCRIPT PREPARED WITH RESPECT TO A CONFERENCE CALL HELD ON
NOVEMBER 1, 2000.
<PAGE> 2
SEAGRAM FIRST QUARTER EARNINGS CONFERENCE CALL
NOVEMBER 1, 2000
9:30 A.M. EST
Coordinator Good morning and welcome to the first quarter fiscal
year earnings release conference. Today's
teleconference is being recorded at the request of
Seagram. At this time I'd like to introduce today's
host, the Vice President of Investors Relations Mr.
Joe Fitzgerald. Sir, you may begin.
J. Fitzgerald Good morning, good afternoon, everyone. We're going
to get started right away in our traditional format.
We have Edgar Bronfman, Jr., our Chief Executive
Officer; Brian Mulligan, Executive Vice President and
Chief Financial Officer with us. Before we begin, I
have two announcements today. One is the usual about
any use of this call without our permission is
prohibited. And secondly is the Safe Harbor language.
There may be some forward-looking statements on the
call. You should know that any of these
forward-looking statements are made based on
management's current expectations.
With that out of the way, we'll get going. Edgar?
<PAGE> 3
E. Bronfman Thank you, Joe. Good morning and good afternoon,
everyone.
We are extremely pleased to be able to report
Seagram's 32% EBITDA gain in our first fiscal
quarter. On a base level it is further evidence of
earnings momentum across all of our businesses.
To deliver sustained earnings growth, as most of you
know, is why we set out to transform Seagram into a
leading entertainment company. Any transformation
demands that you articulate your growth targets and
explain how you'll get there, and I think Seagram has
done just that. And our September results are yet
another example of our success.
On another level, and a very important one, these
results illustrate the momentum Seagram's
entertainment businesses will bring to Vivendi
Universal's transformation into a leading
communications and media company.
Many of you attended Vivendi Universal's recent
investor meetings in Paris and New York where we
described the new company in detail and highlighted
our near-term outlook. Vivendi, Seagram and Canal +
articulated aggressive growth targets, 35% aggregate
EBITDA growth per year from 2000 to 2002. We
described how we'll achieve those targets across our
content, access and aggregation businesses. We all
want to
<PAGE> 4
start delivering those targets. And it appears,
pending shareholder approval, that we'll be able to
get started very soon. Vivendi, Seagram and Canal +
cleared their joint proxy statement with the SEC on
Monday, October 30th. We have now received all the
necessary regulatory approvals in France, the US,
Europe and Canada, and the shareholder meetings for
all three companies are scheduled for December 5th of
this year.
Now I'd like to give you the highlights of our
quarter.
In Music, by any measure, the Universal Music Group
continues to distinguish itself as the industry
leader, making it probably the premier music group
ever put together in the history of the music
business. In current releases, UMG's market share in
the United States rose to 31.5% in the September
quarter. For calendar year 2000 to date, our share of
current releases has increased two full share points
to 28.9%.
Our share of overall releases increased to 29% for
the quarter and has increased to 27.3% for calendar
year 2000 to date. These shares, for both the quarter
and the calendar year, are the highest ever recorded
in the music business in the United States.
<PAGE> 5
Music revenues, adjusting for foreign exchange and
for the sale of our concerts business last year,
increased 6%. EBITDA after FX adjustments increased
21% to $210 million.
UMG remains an industry leader in internet
initiatives. I want to single out one important new
initiative that we just announced at our investor
meeting. UMG has started a subscription service with
Sony that holds enormous potential. UMG and Sony's
combined market share in the US is approximately
43.5% for calendar year 2000 to date. Over 5,000
registered members of the farm clubs are now
participating in a trial of the new service, which
currently has 25,000 titles available. It will
eventually offer all our company's entire catalog,
well into the hundreds of thousands of titles. We
have further plans to offer portability to the
service so that users can take their music and play
it on mobile devices or in their cars, wherever they
go.
This open trial is free through December and we will
begin a commercial launch in January. We believe this
new music service will have a key first mover
advantage in the legitimate digital music space.
I would like to make one comment about the
announcement between Napster and Bertelsmann that was
made yesterday. We welcome the prospect of a peer to
peer business model that respects copyright rather
<PAGE> 6
then flagrantly infringing it. Peer to peer
technology is clearly a potentially exciting business
model and our litigation against Napster is not
against the technology but against the misuse of
technology. It now appears Napster has accepted the
fundamental importance of protecting the creators of
content. That recognition should have occurred at the
outset and saved a great deal of time, effort and
resources that have gone into the litigation.
However, it is important that our litigation against
Napster continue as there is a vital principle of
copyright protection at stake. This litigation is
essential in helping to create the environment for a
thriving, legitimate, online music business.
For Filmed Entertainment, let me say that Universal
Pictures keeps getting stronger. It's last four
pictures, the most recent being Meet the Parents have
premiered as number one at the box office. No studio
has accomplished this feat for over a decade.
And Home Video as well continues to improve. Erin
Brockovich shipped over one million DVD units. We
also shipped over one million DVD units of the
collector's edition of Jaws. Our international
television channels continued to grow and reported
lower losses in the quarter. These channels are on
track to reach break even in 2003.
<PAGE> 7
As we disclosed in August, Universal Pictures took a
$390 million non-cash after tax charge in the
September quarter to comply with a mandated
accounting change for producers and distributors of
motion pictures.
In Recreation, our theme parks reported mid-single
digit attendance increases in the quarter on top of
their outstanding debut in Orlando last year. In
Orlando, Islands of Adventure continues to grow; the
Hard Rock Hotel is on track to open in January, which
will add an additional 650 rooms to that facility.
And finally, Universal Studio Japan is opening only
six months from now.
In Spirits & Wine, because we expect to sign a
contract to sell our Spirits & Wine business by
mid-December, I cannot comment extensively right now.
Certainly our Spirits & Wine business's underlying
performance in the quarter was excellent. Revenues
adjusted for foreign exchange and divested operations
increased 5%. Volume, adjusted for divested
operations, increased 6%. And overall EBITDA
increased 13%. I should say that this represents an
outstanding achievement by our Spirits & Wine Groups'
management team, who have kept focused on building
the great brands that we have while we are going
through this very difficult process. And I would like
to commend them for their professionalism, for their
skill and for their dedication to our company.
<PAGE> 8
Now, Brian and I will be happy to take your
questions.
Coordinator Thank you. Our first question comes from Richard
Simon from Goldman Sachs.
R.Simon I had a question on the, you sort of commented on
Bertelsmann and Napster, but I sort of liked your
view that you're comfortable talking about it
regarding the feasibility. It was pretty devoid of a
lot of details in the conference yesterday.
Then somewhat related to that and also very broad is
they're sort of going after peer to peer. Your farm
club is subscription driven and blue matter, I guess,
is download driven. How do all these sort of play
together in marketing one sort of cohesive effort to
sell music to the consumer?
E. Bronfman Let me answer the second question first. I think that
as technology moves and as the market moves, I think
the market will drive a certain amount of coalescence
around a solution and I suspect that any solution
ultimately will include the ability to stream audio,
download audio and to move audio in a peer to peer
like fashion, and the ability to do that will depend
on technology and how quickly technology comes to the
fore. But I think that you will see the market
coalesce the need to do all of those things for
consumers.
<PAGE> 9
With regard to the first, we don't have a lot of
detail on the announcement either. What I would say
is we do embrace Napster's taking the right point of
view in terms of the sanctity of copyright. We have
yet to know whether or not there's a legitimate
business model that we can follow as they put their
business plan together and until we know that it's
difficult to comment further.
Coordinator The next question comes from Jessica Reif Cohen from
Merrill Lynch.
J. Cohen I have two music questions and a film question. Could
you just explain what are the dynamics for apples to
apples 6% revenue growth on the music side and 21%
EBITDA. How do you get there?
The second question is, going back to the slides from
the analysts' meeting on music, the artists, and this
is for fiscal 2000 cash flow, the artist recoupments
were greater than the investment. I would love it if
you could explain how you can recoup more than you
spend.
Then my final question is, you have an expensive
slate coming up. Obviously well sold but probably a
lot of marketing expenses associated with it. Can you
just talk us through how that will effect the numbers
<PAGE> 10
under the new accounting rules? And if you can, give
us a pro forma for last year?
E. Bronfman Let me try to do my best with number one and three,
and then maybe I can ask Brian to talk about the
artist recoupments.
In terms of the revenue and EBITDA increases, as
you've seen ever since we acquired Polygram we've
been able to grow EBITDA significantly in excess of
the revenue increases as we continue to derive cost
savings from the integration. A number of those cost
savings, most of them were taken in the initial
periods between the close and the sort of end of our
first full fiscal year, but there are additional cost
savings which we're able to continue to bring into
the quarter as we go forward, number one.
Number two, we just had an improved mix this quarter
as well in terms of joint venture albums versus fully
profitable albums, etc. But I would think that I
would say that the consistent ability, though it will
I think diminish over time, at least the spread will
diminish over time, shows the ability to continue to
manage to bring cost savings into the bottom line
with modest mid-single digit revenue growth.
Let me comment about the slate and then I'll throw it
to Brian on the artist recoupment. It's difficult to
predict, as I said any number of times, our
<PAGE> 11
profitability in the motion picture business in any
single quarter. What we've said consistently is that
we expect that in our fiscal year 2001 to return the
business to profitability. I think you've seen the
progress quarter-by-quarter for a number of quarters
now. Certainly we were profitable in the June quarter
and more profitable again in the September quarter.
The way the accounting works, we will be expensing
all of our marketing costs in the quarter. We were
releasing two very big movies in the quarter, How the
Grinch Stole Christmas and Family Man. We are very
optimistic about those pictures, but we're not going
to give quarterly advice here. Obviously we don't
know how the pictures will do. We are highly
confident, I have to say, about both pictures. And
without tempting the box office gods, it may be that
we will extend our premier in four number ones to
premiering five number ones on November 17th when the
Grinch comes out.
In addition, we have a number of high profile movies,
as you know, coming out next year, including Hannibal
which will be released by MGM in the US, the sequel
to The Mummy and the sequel to Jurassic Park II which
will be Jurassic Park III and all of those will
receive significant marketing support.
<PAGE> 12
B.Mulligan In terms of recoupments being higher than investment,
that's just a timing issue. For example, in the prior
year we had several large advances to established
groups and those groups are now releasing this year
and that's accounting for the higher recoupments.
Coordinator Our next question comes from Christopher Dixon from
Paine Webber.
C. Dixon I have two questions. First, Brian, could you give us
a picture of the balance sheet at the end of the
quarter and where we stand today? And on the music
side, could you perhaps give us a feeling as to what
the mix was between catalog and new orders. And more
specifically, where you were at territory, US,
Europe, rest of world.
B. Mulligan In terms of the balance sheet net debt's going to be
up for the quarter about $700 million and that's just
the usual build up, as you know, going into the
fourth quarter in Music, Spirits and the Film area.
In addition in the Film area, in anticipation of the
SAG strike, we anticipate, we want to be prepared if
there is a Screen Actors Guild strike, we want to
make sure that the cupboard's not bare. We have eight
films in production this year versus the prior year
where we had three films in production at this time,
so there's been a little build up in net debt.
<PAGE> 13
E. Bronfman In the Music business, I would say that catalog
represented a consistent portion of the release
schedule. It was not a catalog heavy quarter in the
September quarter. I would say on a global basis, we
obviously were very, very strong in the US, but we
see that continuing. We had a number of major
international releases slip from the first quarter to
the second quarter. Perhaps the most notable one, U2,
which is actually debuting around the world
yesterday. It actually debuted yesterday. It was
dropped to stores around the world on October 31st.
That we expect will be a very, very large album. We
had originally planned that in the first quarter
internationally, it's now coming in the second
quarter.
But when I look at the market shares in our key
European countries as well, we are doing
extraordinarily well in those markets. So I would
expect continued strong performance in the US,
stronger performance in our European markets in the
second quarter than the first quarter, and I
obviously cannot predict the effect of the euro in
translating those results. Although I hope by the
time we do translate those results, they'll be in
euros.
Coordinator The next question is from Irene Natell, RBC Dominion
Securities.
I. Natell Two questions. First of all, could you just explain
why there was a 9.9% decline in revenues in Filmed
Entertainment during the quarter?
<PAGE> 14
And second of all, just following on the music, of
the improvement in EBITDA, it was sort of half and
half from cost savings and sort of the strong chart
performance, was it 2/3-1/3? Could you sort of
quantify that for us?
E. Bronfman Why don't I do that first and I'll let Brian handle
the Filmed Entertainment revenue issue. I don't have
the numbers in front of me, Irene, but I would say it
probably does break down about half and half to cost
savings and EBITDA improvement. And I expect that
we'll be able to continue to translate EBITDA
improvement greater than revenue improvement, but
just not at the rate that we've been able to do it
over the past four or five quarters.
B. Mulligan Irene, as you know, in the film business it's not how
many films you release, it's the performance of those
films you do release and how they perform is what
really drives the EBITDA line. Last year we released
26 films, and you'll recall we were assimilating some
of the Polygram films at that time and that's why we
had such a large number of releases. So for the
calendar year through September 30th, we released 26
films. This year we've only released 16 films.
Obviously we feel there's a higher quality in the
films we released this year and that's being
reflected in the EBITDA
<PAGE> 15
line. And that's really what accounts for the
decrease in revenue for the comparative quarters.
Coordinator Our next question comes from Jill Krutick from
Salomon Smith Barney.
J. Krutick Good morning. I was hoping to dissect the Music
revenue growth a little bit further in terms of unit
volume and pricing what you saw that split in the
quarter? And the market share numbers you gave at the
beginning if those were worldwide, great, but if they
were just domestic, could you provide some worldwide
market share and comparisons? Perhaps to some of your
key markets?
E. Bronfman Let me try to answer the second question and maybe
I'll give Brian the first question. In terms of the
market share, the market shares that I did mention
were US based. And as I said, I think we said for the
calendar year to date we're at almost 29% of current
market share in the US, and of total albums 27.3%, I
believe is the number.
In worldwide, we are at about 22.1% globally. That
reflects much higher share then all of the major
markets except for Japan where we have, as you know,
a much smaller market share, which hovers around 10%,
which skews our global market share down in Japan to
being the number two
<PAGE> 16
market. We see that as a real opportunity to
significantly increase our Japanese market share.
As I mentioned, we had some slippage in some of the
key markets in releases from Q1 to Q2. But certainly
as we go through the first half, I would expect us to
increase market share, and in fact, I see it
happening as we speak, in certainly the top key
markets from the UK, France, Germany, Japan, Brazil
and even other markets. So we're seeing very strong
results in terms of market share across the board.
B. Mulligan In terms of the unit volume, obviously we're up in
North America, up at a good pace given our market
share. We were down a little bit in Europe due to the
slippage that Edgar just spoke about it. We were up
in the Far East and about flat in Latin America.
Coordinator Our next question comes from Kathy Styponias from
Prudential.
K. Styponias Some more music related questions. I was wondering if
the pro forma EBITDA growth rates that you gave also
included, whether or not it was pro forma for your
acquisition of Rondor earlier this quarter? And then
with respect to your subscription services, AOL/Time
Warner have also announced that they're planning on
launching a subscription service. I was wondering if
you could talk a little bit about whether or not you
<PAGE> 17
would potentially make your catalog available to that
service and vice versa? Then also with respect to
these new subscription services that you've launched,
whether or not that changes the $85 million in
investment that you anticipated making this year?
Thanks.
B. Mulligan In terms of Rondor, it's not pro forma. There's one
month of the Rondor results in our numbers.
E. Bronfman In terms of subscription services, let me answer that
we're still estimating a spend of about $85 million
in the initiative, so there's no change in the
guidance there.
In terms of subscription services, we would welcome a
subscription service by AOL and by any other major or
minor distributor of digital information. We
certainly would contemplate that, assuming it's a
business model that we could create that works for us
and for them, licensing our music broadly. Our view
is that music should be ubiquitous on the Internet.
We believe that we've got a lot to offer as a front
end and we will be competitive, we hope, in that
space. But it's absolutely our intention to license
our music broadly to legitimate music services on
proper terms and conditions to see that our artists
are properly compensated and we would contemplate and
we would hope that we would be able to come to some
kind of agreement with AOL and other services like
AOL. And we would
<PAGE> 18
hope in addition that AOL, to the extent that it
would end up as the owner of a music catalog in the
music business would be willing to license to our
service as well.
K. Styponias Just as a follow up to Brian, was the Rondor
acquisition, how significant was that in terms of the
EBITDA growth of 20% that was driven in the Music
division?
B. Mulligan It was not very material to the quarter.
Coordinator Our next question comes from Laura Martin from CS
First Boston.
L. Martin First one on Film, the whisper number out here for
the strike is a six month long strike. I think maybe
as a capital allocator I'm excited about this,
because that's a business that destroys value. That's
the glass half full. If you think about the cost and
your completion guarantees terms, tell me what you
think happens to the accounting statements if we have
a long SAG strike over the next 12 months?
Then, the second thing is, synergies was a big theme
of Messier's when we were all in New York and Paris.
The question I have for you, if you think about his
600 million euros number of synergies over the next
<PAGE> 19
several years, how much do you think you get out of
the current Seagram operation?
B. Mulligan In terms of if there's a six month strike, it will
actually be good for our operating results, because
now I think virtually 90% of every film that gets
released in the quarter is going to take a loss
because of the new accounting rules. So in terms of
modeling, I think our results will improve. Obviously
long-term it's not a good thing not to have movies.
But in terms of the short-term outlook, it will
improve performance.
E. Bronfman Let me add, though, I don't think we want to in any
way leave the impression that we believe that there
will be a strike or six month strike or have any
forward looking view on that. There's a lot of time
left and we'll just have to see how all of that plays
out. I just don't want to leave the impression that
we agree or disagree with that perspective.
In terms of the synergy number, I'm not quite sure
what you mean by the Seagram operations, but if
you're talking about the Seagram Entertainment
operations, or Seagram business as a whole, remember
that that 600 million number thereabouts was made up
of 400 million euros of costs and 200 million euros
of revenue. Within the costs area, obviously there
will be reduction costs at Seagram headquarters,
there will be reduction in costs in the combination
of Canal+, Studio Canal, Universal
<PAGE> 20
Studios and Universal Pictures and that will account
for some portion of the 400 million euros.
Then in terms of the revenue synergies, obviously I
think the largest number of synergies will occur
probably on the Music side with the access businesses
of Canal and Cegetel. So I think the Seagram and
Universal businesses, both from a cost contribution
to those synergies and a revenue contribution to
those synergies, will be quite important.
Coordinator Our next question comes from Tim Casey from Nesbitt
Burns.
T. Casey Edgar, could you give us a date, as close as you
could estimate, when you expect to close the
transactions following the meetings on the 5th?
Second, any comments you could have regarding the
noise in the press right now regarding Captain Morgan
and Allied Domecq saber rattling.
And third, I was wondering, to the extent you're
comfortable, if you could flush out any more of the
pricing dynamics or any of the early returns you're
seeing from your subscription service? You had tossed
a number out, somewhere in the neighborhood of $15 a
month at the analysts meeting and I think a number
closer to $5 was mentioned by BMG. Just any comments
regarding that would be helpful.
<PAGE> 21
E. Bronfman Let me try to tackle all of those. In terms of
closing dates, we hope and expect that our
shareholders will be as excited about this business
combination as we are and vote to approve the
combinations on December 5th. If that occurs, all
that is required is for the Ontario court to ratify
that decision, which we expect would come within
several days of the 5th. So we would hope, all things
being equal, that by the end of that week we will
have officially closed the transactions.
In terms of Captain Morgan, I'm not going to
characterize, as you did, Allied Domecq's process,
behavior or otherwise, but I think that saber
rattling is as polite a term as I've heard around
these halls, at least. But let me just say that we
are very confident in our position. We will be
selling our business as a business. It will include
Captain Morgan. We could not be more confident of
that fact and we stand by our position and we do so
with significant confidence.
In terms of the pricing dynamics in terms of the
subscription service, I can give you no early color
in terms of the farm club trials. As I mentioned in
my opening comments, that trial is free and it's
really a technology trial to make sure that we can
get the service up to be as robust as a consumer
experience as possible for a commercial launch in
January.
<PAGE> 22
With regard to where these services are going to
price, one of the comments I think I made to an
earlier question about the business model, the
business model is unknown today, whether it's a
Bertelsmann Napster business model or a Sony
Universal business model or potentially an AOL
business model. I don't think I should comment on
what that would be except to say that we want to find
a business model that will reward consumers and
artists alike and we think that a $15 number is
certainly much closer to the mark than a $4.95
number. And I would suspect that you should regard it
as somewhere between unlikely and very unlikely that
we would be licensing our music to a service that
would remunerate us on the level of $4.95 per
subscriber per month.
Coordinator Our next question comes from Keith Howlett from
Research Capital.
K. Howat One question on the Film business. I wondered if you
could identify what the impact of the new accounting
standard was in the quarter being independent of the
one-time charge you took?
And the second question is, I wondered if you could
speak a little bit about attendance and per capital
expenditures in the theme parks?
B. Mulligan In terms of the impact on the quarter, it was about a
wash in terms of on a run rate. As you know, we took
a $390 million after tax charge. But the
<PAGE> 23
early expensing of advertising for films that are
going to be released in the second quarter, our
second fiscal quarter, offset any pick up that we had
as a result of adopting a new accounting standard.
E. Bronfman In terms of attendance and per caps, as I mentioned
in the opening comments, attendance is up mid single
digits at the theme parks. That I think is very
strong performance because we had a great opening
last year in Orlando when we opened Islands of
Adventure.
The expansion of City Walk in Hollywood has been a
very real success as that continues to go from
strength to strength. We've seen real increases
there. Very, very strong progress in Florida. And
what I would also say is that on a per cap basis
we're also seeing really a nice, modest improvement
on a per cap basis, but that really is actually
stronger performance then it might appear because
we're also at the same time seeing people beginning
to stay longer periods of time, particularly in
Orlando. And as you get people spending two days as
opposed to one day, per cap's obviously go down. So
as we've seen both longer stays, which is what we've
been driving towards in Orlando, and per caps up
modestly, that combination we think is a very
positive one.
J. Fitzgerald We'll take two more questions.
<PAGE> 24
Coordinator The next question is from Scott Davis, First Union
Securities.
S. Davis All my questions have been answered. Thank you.
E. Bronfman Still as skeptical as before Scott?
S. Davis No comment.
E. Bronfman Alright.
Coordinator There are no further questions at this time. I would
like to turn the conference back over to you, Mr.
Fitzgerald.
J. Fitzgerald Thank you one and all. We'll be speaking to you soon.
Bye.
