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Wednesday, May 20, 1998 Published at 18:37 GMT 19:37 UK

Biz: The Company File

Hero of British films faces a wedding and a funeral
image: [ PolyGram's Four Weddings And A Funeral grossed about $250m in 1994 ]
PolyGram's Four Weddings And A Funeral grossed about $250m in 1994

In the wake of successes like The Full Monty, Trainspotting and The English Patient, British production companies are the toast of this year's Cannes Film Festival. And after ten years in the doldrums the European film industry is enjoying a revival.

But the party atmosphere has been tainted by news that PolyGram, the music group and Europe's largest film company, will almost certainlu be bought out by Seagram, the drinks and entertainment giant from Canada.

If the deal goes through - and Seagram is ready to pay $10.5bn (£6bn) for the pleasure - PolyGram Films will be folded into Universal/MCA, a Seagram subsidiary.

[ image: Ewan McGregor in box-office hit Trainspotting]
Ewan McGregor in box-office hit Trainspotting
PolyGram, which backed hits like Four Weddings And A Funeral and Bean, has been a major factor in the rebirth of the British film industry - although the growth in US-style multiplex cinemas has also boosted ticket sales. Since 1991, the group has invested $1.2bn in film production and distribution and has backed 1,500 movies.

So European film-makers fear it would be a huge blow to their main source of finance, if their chief lobbyist to the European Commission - and first serious rival to American movie-makers - was gobbled up by Hollywood.

Box-office hits backed by PolyGram sparked enthusiasm among production companies on both sides of the Atlantic.

The French cinema group Gaumont pumped $90m into The Fifth Element, making it the most expensive European film ever made. Two other French companies, Pathé and Canal Plus, increased their film-making activities, along with UK media groups Granada and Channel 4.

Across the pond, Walt Disney's Miramax backed The English Patient while 20th Century Fox produced The Full Monty.

Plans for biggest ever music group

Seagram's desire for PolyGram lies not so much in its film business as in its world-famous music portfolio which makes it an extremely attractive purchase.

[ image: Bob Marley: top name in PolyGram's Island Records]
Bob Marley: top name in PolyGram's Island Records
It is the world's largest record company whose roster of artists include superstars like Pavarotti, U2, Metallica, Bob Marley, Elton John, Sheryl Crow and Hanson.

But more recently, it has struggled to compete in a stagnant market damaged by the economic crisis in Asia and by Internet piracy.

Its parent company. the Dutch electronics group Philips, sees PolyGram as a tiresome burden especially since its film business has yet to make to a profit despite recent box-office hits.

After PolyGram issued a profit warning last month, Philips decided to sell its 75% stake in the company.

Edgar Bronfman, chief executive of Seagram, seized on the opportunity after take-over talks with another music giant, EMI, failed two weeks ago.

Analysts say Bronfman is keen to expand Universal Music and create the world's largest music group.

He is considering floating Seagram's Tropicana fruit juice subsidiary and selling 11 million shares in Time Warner, the American media group, in order to fund the acquisition. Seagram also wants to buy the remaining 25% of PolyGram's shares in public issue.

Bronfman was not the only suitor. An investment group led by the former Walt Disney president Michael Ovitz had considered bidding but pulled out on May 20.

So the way is now open for Seagram to entice PolyGram over to America. If it succeeds, it will bring to an end Europe's best attempt yet to beat Hollywood at its own game.

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