annals of communications
The New Yorker - June 6, 1994
From the time Edgar Bronfman, Jr., skipped college for a career in Hollywood to his decision to take over and redirect a large part of his family's Seagram Company, he has had a clear sense of what he wants his achievements to be. Some nervous executives at Time Warner are wondering where they fit into his plans.
As the day wore on, the rumor that Seagram was about to mount a hostile takeover of Time Warner echoed loudly. Perhaps the rumor began with stockbrokers, who tipped their clients, who placed their bets and then alerted reporters, who jumped at a scoop and phoned Seagram officials, who were not in, and then reached jittery Time Warner sources, who could not deny that their company was a target, because they did not know, and naturally made their own inquiries, thereby confirming hunches that something was afoot. By the end of the day--Tuesday, May 3rd--the whispers became a roar. The stock market stampeded: nearly four million shares of Time Warner stock were traded that day, and its price was ratcheted up by almost eleven per cent. Time Warner, the world's largest communications company, was besieged. "The press calls started to come fast and furious," says Edward Adler, a Time Warner spokesman who was relaying the rumors to senior executives.
The rumors said that Edgar Bronfman, Jr.--the "star-struck president" of the Seagram Company, according to the next morning's USA Today--was closeted with his bankers readying a fifty-five-dollar-a-share hostile takeover of Time Warner. One rumor claimed that Bronfman was in cahoots with QVC's chairman, Barry Diller. Another said that Bronfman's co-conspirator was the entertainment entrepreneur David Geffen. Rival bidders--Bell Atlantic, Tele-Communications, Inc., U S West, Bell South--were said to be armed for battle. Bronfman, who had not been in his office for two days, was rumored to have scheduled a press conference for seven-thirty that night, to announce that Seagram, the six-billion-dollar spirits, wine, beverage, and investment company, would raise its Time Warner stock holdings from almost fifteen per cent to outright ownership.
The reality of the situation was considerably different. At 4 P.M. that day, Bronfman, the thirty-nine-year-old president of Seagram, had no hint of the rumors. Dressed in faded bluejeans, brown suede half boots, and a knitted navy-blue shirt, Bronfman had spent the day at the Doral Arrowwood Resort and Conference Center, in Westchester. He had been sequestered for two days not with bankers but with more than two hundred Seagram managers, who were attending the company's first world-wide marketing meeting. The morning of May 3rd was shared with the managers of such brands as Chivas Regal and Glenlivet Scotch, Martell cognac, Crown Royal whiskey, Meyers rum, Perrier-Jouet and Mumm champagnes, Absolut vodka (Seagram markets and distributes it worldwide), Sterling Vineyards, and Tropicana beverages.
When the flood of rumors crested, that afternoon, Bronfman was seated in a windowless basement meeting room, where he was giving me an interview. He had no evening press conference planned; instead, he was scheduled to return to Manhattan to attend a dinner that his grandparents Francis and John Loeb were giving for him and his wife, Clarissa, whom he had married just ten weeks before. When the interview ended, at four o'clock, Bronfman wandered upstairs to his suite and phoned his office. Only then did he learn, from his secretary, of the rumors and the avalanche of calls from reporters and business associates. He checked with his people, and they offered the guess that the rumors had been provoked when it was noticed that E. I. du Pont de Nemours & Company, which is one-quarter owned by Seagram, had filed with the Securities and Exchange Commission the previous Friday to raise three billion dollars through a bond issue. The market may have believed that the three billion dollars was meant to finance a Seagram war chest.
Bronfman had known that the market was jumpy about his intentions. Ever since it was announced, exactly a year earlier, that Seagram had secretly bought 4.9 per cent of Time Warner's stock as a friendly investor, and planned to increase that stake to nearly fifteen per cent--a total that had just been attained, on May 2nd--the market had been convinced that there was a gap between Bronfman's soothing words and a naughty intent. At a time when Seagram's core business had become mature in North America and Europe, while communications companies' stocks were sizzling everywhere, investors and reporters were certain that Bronfman was scheming to control Time Warner. They knowingly recited from his biography: that he chose to become a movie and theatrical producer rather than attend college; that he wrote the lyrics for a number of recorded songs; that he was tall and lean and had the dashing good looks and the graceful manner of a movie star; that, like many stars, he spoke almost in a whisper, so one strained to hear him; and that he was a pal of Diller, of the Hollywood superagent Michael Ovitz, and of the actor Michael Douglas. They were certain that he wanted a bigger playpen: one offering the world's most profitable studio, pay-TV company (HBO), record group, and publishing company; such magazines as Time, People, Sports Illustrated, and Fortune; a position as the second-largest owner of cable systems; and keys to a mammoth entertainment and information library.
Like the market, Time Warner itself was suspicious. Although it had issued a statement that "welcomed" Seagram's initial investment, an executive who is close to Time Warner's chairman and chief executive officer, Gerald M. Levin, admits, "This was just corporate talk. We were just responding to the 'sincerity' of their statement. Ever tell a woman you love her?" A truer measure of Time Warner's corporate attitude toward Seagram came last January, when its board--mindful that in 1986 Laurence Tisch and the Loews Corporation had gained effective control of CBS when, after buying just twenty-five per cent of the stock, he was welcomed on the board and used his position as leverage--unanimously adopted a poison pill stipulating that any entity that acquired more than fifteen per cent of the company's stock would have to pay a hefty bonus, unless it made an all-cash offer for the company. While Levin and Bronfman have had lunch about a dozen times in the past year, insiders at both Time Warner and Seagram concede that the courtship has been awkward. Bronfman, whose original purchase made him Time Warner's biggest shareholder, wants to be treated as a partner, a co-owner. Levin, however, treats him as an investor--one of many in the company. The Bronfman family, which has owned nearly forty per cent of Seagram stock since Edgar, Jr.,'s grandfather Samuel bought out Joseph Seagram & Sons, in Canada, in 1928, has begun to bristle at what it interprets as condescension. "If I were Jerry Levin, I would have at some point asked somebody over here to get on the board and start talking about a standstill agreement," Seagram's chairman and C.E.O., Edgar M. Bronfman, Sr., told me. (He meant a pledge not to buy more than a certain percentage of Time Warner stock.) This is the first time a Seagram official has acknowledged publicly that that was the company's wish. Edgar, Jr., says of a stand-still, if asked, "I'd be happy to discuss it with them."
Time Warner is unlikely to grant Bronfman's wish. A ranking Time Warner executive says, unequivocally, "This board has no intention of inviting the Bronfmans on the board." Nevertheless, a year after Seagram went public with its investment, both parties are still in the handshaking phase of their relationship. As a courtesy, Bronfman, Jr., phoned Levin from Arrowwood soon after he heard the rumors on May 3rd. "Listen, Jerry, I'm here at a marketing meeting," he said. "I just called my office, and I heard about all these rumors. I don't even know what the rumors are, but I'm denying all of them." Levin thanked Bronfman for his call. What Bronfman didn't say to Levin, but said to me shortly after making the call, was this: "The closer Time Warner and Seagram get, the fewer these rumors."
"How do you get closer?" I asked.
"That's up to Jerry," he said, clearly exasperated.
THE man whom Levin and Time Warner prefer to keep at a safe distance is the second son of Edgar Bronfman, Sr., and his first wife, Ann, who have three other sons and a daughter. Until Edgar, Jr., was eight, the family lived in the leafy Westchester suburb of Purchase. They were the grandchildren of Samuel Bronfman and John Loeb--the former the gruff Russian Jew who created what became America's foremost spirits company, the latter an elegant descendant of the nineteenth-century German Jews memorialized as Our Crowd, who founded Wall Street's Kuhn, Loeb & Company. Edgar, Jr., and his brother Samuel Bronfman II, who is nineteen months older, have been close since childhood. (The two other brothers are Mathew and Adam; their sister is named Holly.) "Edgar was always older than his years," says Sam Bronfman, the president of the Seagram Classics Wine Company, which is based in Northern California. "He wanted to be grown up. He liked doing things adults did. I always enjoyed being the age I was." Their father invested money in various theatrical and movie projects and had a screening room installed in their home. After viewing a movie, he often invited guests to discuss it. No matter that Edgar, Jr., was still a teen-ager, the father wanted to hear his opinions. "He was never bratty," Edgar, Sr., recalls, adding, "I remember having more mature conversations with Edgar than with almost any other member of the family."
Edgar, Jr., was forced to grow up a bit more quickly than he had expected when his parents went through a bitter, protracted divorce during his teen-age years. In 1963, the family had moved to a co-op on Park Avenue, and before long Sam was attending Deerfield Academy, while Edgar went to the Collegiate School, where he recalls getting "reasonably good grades." In addition to his eagerness to attain maturity, a certain rebellious spirit took root. "From the time I was ten, I always knew, but always, that I would never go to college," he says. "School bored me to death." He was sent to summer camp, but when he was fifteen he refused to go back. He had meanwhile picked up from a family coffee table a movie script, "Melody," and now persuaded his dad to put up four hundred and fifty thousand dollars to help finance it. In early 1971, Edgar, Sr., hired a first-time producer, David Puttnam, and a first-time screenwriter, Alan Parker, and they planned to go into production the next summer in England. Edgar, Jr., talked his father into getting them to hire him as a gofer. He was paid ten pounds a week, and got his "room and board from some friends of Dad's"--the actress Joan Collins and her husband, Ron Kass. "I loved living in London," Edgar, Jr., says. "I loved being on my own. And I liked dealing with the creative process."
He went back the next summer as an assistant to Puttnam, reading scripts, among other chores. "I fell in love with a script called 'The Blockhouse,' " he recalls. It was about Poland during the Second World War. Puttnam thought it dark and depressing, but Edgar, Jr., saw it as a drama of dignity. He raised the money for the project as co-producer, and took a couple of months off from high school to complete the film. "It was everything Puttnam said," he recalls. "It was dark and it was depressing. And absolutely nobody wanted to see a movie that took place underground with seven men slowly starving to death."
Edgar, Jr., returned to finish Collegiate, and during his senior year he forged a partnership with the Broadway producer Bruce Stark, to whom he had been introduced by his father, one of Stark's backers. "Edgar, Jr., waltzed in one day after Collegiate," Stark recalls. "Remember, I'm then thirty years old and he's sixteen. He brought along a script he wrote. For a script by a kid, it was fantastically well written." They liked each other instantly, and decided to team up to develop movies and Broadway plays. When classes were over for the day, Edgar, Jr., went downtown to a seedy Broadway office they had rented; they'd jammed two metal desks together to make a partners desk.
After graduation, Edgar, Jr., told his parents that he would not be going on to college but instead would continue his partnership with Stark. "I can't make you go to college," he remembers his father saying. "But I'm not going to support you in order for you not to go to college." Nevertheless, Edgar, Jr., admits, "in fairness, he never let me starve." Stark, however, had two children to feed, and he was soon devoting himself full time to producing a musical.
Young Edgar headed for Hollywood, and there the Bronfman connection opened doors closed to other young men. He met Barry Diller, who was then running the Paramount studio. He also met with Robert Redford and Sydney Pollack. He impressed people. "I saw he was smart," Diller, who became a mentor, says. "When I met Edgar, I was thirty-two. As a teen-ager, I always acted older than I was. You see that in someone else and gravitate to it."
Diller gave Edgar, Jr., intellectual succor but no work. And Edgar, Jr., hated waiting interminably to get anything done. He did not want to become a ward of his father. "It became a matter of pride not to go to him for help," he says. Still, he acknowledges, he sometimes did receive help. John Bernbach, whose father was the legendary advertising man William Bernbach, and who is a close friend of Edgar, Jr., says that what is hard about being the child of a famous parent "is that you never have a piece written about you that doesn't say 'son of . . .' "
Edgar, Jr., and his mother, who has not remarried and lives in Washington, D.C., have always been close. "She was unjudgmental," Sam Bronfman says. "She loved you unconditionally." Their father was more remote. Edgar, Sr., spent much of the seventies and eighties getting into and out of four marriages, and his children had sometimes felt neglected. "I was always much more standoffish," Edgar, Sr., concedes. Through the first twenty-five years of young Edgar's life, his relations with his father were often stormy.
They pulled together as a family in 1975, when Sam, who was then selling ads for Sports Illustrated, was reported to have been kidnapped; a few days later, he was rescued unharmed. Father and son became estranged after Edgar, Jr., decided to marry Sherry Brewer, a beautiful black actress. They had met after he wrote a pop song, "Whisper in the Dark," for her friend Dionne Warwick. His father was furious. "He didn't want me to marry Sherry in the worst way," Edgar, Jr., says. "I was too young to get married. He genuinely worried how difficult an interracial marriage was. We never had a problem. I never saw Sherry as a black woman. I don't see my children that way at all." In one of the many quarrels between father and son, the son remembers erupting with the question "Are you telling me that I couldn't be president of Seagram if I married Sherry?" The father said no, but the son guessed that this was his father's true concern. "I don't care about that!" the son exclaimed.
Ann Bronfman intervened, and persuaded her son to wait a year before marrying. He did so, but his mind was unchanged, and in November of 1979 the couple eloped to New Orleans. "Mom closed ranks immediately," her son recalls. "It took Dad a little longer. He threw a cocktail party for us, but I could see he was not happy. We remained estranged."
The first of Sherry and Edgar Bronfman's three children was born in 1980, on location for "The Border," a film starring Jack Nicholson, which Bronfman was co-producing for Universal Pictures. Edgar, Jr., and his father rarely saw each other in the two years between the marriage and an invitation he sent his father and his wife to attend a screening of "The Border." It was a pro-forma invitation, a courtesy, extended after Edgar, Sr.,'s longtime assistant, Maxine Hornung, suggested to Edgar, Jr., that his father would be upset if he were not invited. The son reserved a table for four at La Cote Basque, for dinner after the screening. The father praised the movie profusely. They talked about the entertainment business, and Edgar, Jr., said he was pondering a move back to New York, thinking that he preferred producing plays to producing movies. They had a pleasant evening--until the bill arrived. "I kept waiting for him to pay the bill," says the son, who got stuck with the check. The following day, Edgar, Sr., asked his son to come to his office.
Edgar, Sr., who was then fifty-one and had run the company since his father's death, in 1971, had a purpose in asking to meet with his son. "It was always important to me, and I'm not quite sure why, that one of my children would take over this company after me," he says. Although Edgar, Sr.,'s younger brother, Charles, was deputy chairman, he had diverted his energies elsewhere: he had become the principal owner of the Montreal Expos. Their two sisters, Phyllis and Minda, had stock in Seagram but were otherwise uninvolved in the company. Sam Bronfman was now an executive in the wine division of Seagram, but his father did not believe that he was the natural heir to the company. When Edgar, Sr., looked at Edgar, Jr., he saw more of himself than he saw in Sam, he says; he saw a quick, instinctive, decisive mind. He thought his son could make the kinds of business decisions he had made. He took pride in having made more than two billion dollars by having had the good sense to sell Seagram's oil and gas assets in 1980, just before their value crashed. With a combination of stealth and luck, he then steered the profits toward the one-quarter ownership of DuPont, and DuPont has since tripled in value. The expansion of Seagram's basic spirits business was in no small measure financed by two billion dollars in cash dividends harvested by DuPont.
Days before the dinner at La Cote Basque, Bronfman, Sr., had consulted his friend John L. Weinberg, a director of Seagram and a senior chairman of Goldman, Sachs & Company. "Edgar, Sr., respected the fact that his son did his own thing," Weinberg recalls. "They both had a creative bent." The day after the dinner, father and son met in the fifth-floor waiting room adjoining Edgar, Sr.,'s office in the Seagram Building. The father told his son that by now, at the age of twenty-six, he had proved that he could work with difficult people, and had honed his skills as an executive. There was no reason his creative thirst couldn't be sated in the business world. "Will you join the company with a view to eventually running it?" he asked. Those are the words that Edgar, Jr., remembers hearing from his father. They were a shock, for his father is not an expressive man. "Dad doesn't really like to talk about stuff," Sam Bronfman says. "He writes letters."
Edgar, Jr., was moved. "In a sense, it was a great personal victory to be asked," he recalls. "In a sense, it was like having approval bestowed on you." He knew that his father was offering to entrust the family's welfare to him. The son said he wanted to go back to California, talk it over with Sherry, and think.
To Edgar, Jr.,'s surprise, Sherry urged him to accept. He tried to separate the minuses and pluses. The minuses: he would be working for his father; he would be ceding some of his independence; and, he remembers thinking, "In joining the company, I would have to accept for all time never being viewed as making it on my own. Because I didn't. That was part of the leap of joining the company." The pluses: it was a fresh challenge at a time when his patience with the movie business was worn; it was a bigger stage from which to advance his activist views, as his father had done as an early fund-raiser for Hubert H. Humphrey and other Democratic Presidential contenders, and as the president of the World Jewish Congress. "Besides," he says, "I think I wanted to prove to Edgar that I could do it. And I wanted to prove it to myself."
The overriding plus, however, can be distilled in a single word: "family." Bronfman, Jr., says, "There are a lot of parts to the answer. But the first part is family. There is an incredible pride in this company and in the family, in who we are and what our grandfather created, and what our father and uncle enlarged." The writer Barbara Goldsmith, who was a neighbor of Ann and Edgar Bronfman in Westchester and has been a lifelong friend of Edgar, Jr., says of him, "He is a born caretaker. He's always taking care of his siblings. A typical Edgar thing is to call me and say, 'Holly might move to New York. Where should she get an apartment?' He is very sensitive to emotional nuances. He has an artist's temperament. His nerve endings are always exposed."
Edgar, Jr., put forth three conditions that had to be met. First, whatever job he started with had to be temporary; if he didn't like corporate life, he was gone. "Second, I have an older brother who's already in the company whom I love very much, and if it's not O.K. with him I'm not joining," he recalls saying. "The third condition is that if I'm joining the company, I'm running it. I can't, ultimately, work for someone else if I prove myself." His father remembers accepting two of the conditions but does not recall that his son said he wanted to check first with Sam. According to Sam, there was some initial tension. "When he first joined the company, I had been there awhile. A rivalry was created by others," he says. Finally, young Edgar said yes.
"I was shocked," Bruce Stark, his former Broadway partner, says of the decision. "It was the last thing I ever thought he'd do. He was a renegade. He was an artist. He didn't have a corporate attitude." David Freeman, who was a scriptwriter on "The Border" and had shared many meals with Bronfman, says, "I thought, This guy will be back. He loved movies and theatre and music."
Those closer to Seagram were shocked for different reasons. "There was absolutely no reason to think he had any ability," says Richard M. Clurman, a former chief of correspondents at Time and Life, who served as a counsellor to Edgar, Sr., during the eighties.
Edgar Bronfman, Jr., joined Seagram in early 1982, as an assistant to Phillip Beekman, who was then the president and chief operating officer. Edgar, Sr., perhaps remembering his own experiences in the company with his author-itarian father, was determined to give his son room to grow. Soon after assuming his post, Edgar, Jr., turned skeptics into boosters. "He was astonishingly self-assured without seeming arrogant," Clurman says. "He was extremely capable. He handled himself beyond anyone's comprehension. The question was: How was he so good with so little preparation?"
Within months, Bronfman asked to run Seagram's European operation, which, like the company's other international operations, was then losing money. "He wanted to work for me," recalls Edward Francis McDonnell, who at the time was the president of Seagram International and ran it with an iron hand. "I was very reluctant to take him." McDonnell had left the presidency of Pillsbury International the year before to join Seagram, and he was determined to transform Seagram's inbred culture--to induce Seagram to think of itself as more than a North American company and of Europe as more than a playground. He worried that Edgar, Jr., would strengthen forces that he was seeking to change, or would get in the way.
Young Bronfman moved to London and quickly impressed his colleagues. "It was not that easy to change that culture," McDonnell recalls. "But once I had a Bronfman it was easy. He's a very good listener. After he'd been with me a few months, I came to the conclusion that he was the youngest fifty-year-old I'd ever met. He inspired tremendous loyalty. He had great humor. He was part of the team. What he didn't know, he asked about. Which is what bright young people born with a silver spoon in their mouths don't do." Today, McDonnell says--tracing the turnaround from the time he and Edgar, Jr., joined the company--Europe contributes about a third of the company's revenues.
When Edgar, Jr., started at Seagram, the company had three basic businesses--spirits, wine, and nonalcoholic beverages. In 1984, Edgar, Sr., asked his son to return to the United States to run the largest segment, spirits. Having done so for a year, Edgar, Jr., set out to expand the wine-cooler business. "The night we became the closest was when he wanted to hire Bruce Willis to do the wine-cooler ads," Edgar, Sr., recalls. His son had come to his apartment to say that his instincts told him to go with Willis and an aggressive ad campaign. Then go with your instincts, his father said. Edgar, Sr., recalls, "It was one of the great successes of all time. We went from No. 5 to No. 1." The father believed that marketing was crucial, and his son was proving adept at it. "The only difference between Chivas Regal and something else is the creativity of the advertiser and the aura about it," Edgar, Sr., says. "That's what marketing is all about. And he knew how to do it." There are, of course, limits to good marketing: today, Seagram's wine-cooler business, which was once projected to have annual sales of a hundred and twenty-five million cases in the United States, sells just twenty-five million.
Edgar, Jr., next wanted to streamline and reorganize the company, terminating people, but he encountered internal opposition. Sam Bronfman lobbied his father to support his brother. "That was the transition point for Edgar and me, where we went from being rivals--at least, in some people's minds--to being mutually supportive," Sam recalls.
The brothers had one more test of their relationship, and this came in 1986, when Edgar, Sr., decided to choose Edgar, Jr., to eventually succeed Beekman as president and chief operating officer. "When I did make the choice, it was very hard," Edgar, Sr., recalls. "It was hard to do what I had to do to Sam, who expected to get it because of primogeniture. I knew he was going to be angry and disappointed. And I didn't want to hurt him." The father nevertheless says matter-of-factly, "I'm not as close to Sam as I am to Edgar."
"It was hard for me at the time, because I was the oldest son," Sam says. The decision was just as hard to swallow for the company's deputy chairman, Charles Bronfman, who was upset when he saw his darkly handsome brother and his then chubby-cheeked nephew peering from the cover of the March 17, 1986, issue of Fortune. To reporters, Charles Bronfman objected to the dis-closure of the choice. This was the first public rupture within the family, but it was quickly repaired. Meanwhile, Sam Bronfman was anguished. He and his wife, Melanie, who had met when they were freshmen at Williams College, had long talks. "I had to examine, deep down, what was most important in life," he says. He came up with the same answer his brother had come up with in 1982: family. And he came up with something else: "After a while, it became clear in a variety of ways that Edgar was better suited for it. That's something I agree with from both a life-style and an ability standpoint."
The crisis drew the brothers closer. "I admired him for many, many things, including his ability to be supportive of me," Edgar, Jr., says of Sam. "I'm not sure that I could do that if the situation were reversed." He successfully pushed for Sam to become a Seagram director, and when Melanie Bronfman was dying of breast cancer, in late 1991, he moved out to California to live with the couple for the last month of her life. Today, when the brothers encounter each other, they exchange a five-step handshake that is a cross between a secret fraternal greeting and a high five.
ONE of the first major corporate decisions that Edgar Bronfman, Jr., advanced came in 1988, when he acquired Tropicana Products from Beatrice Foods for a billion two hundred million dollars. The price was too high, critics said. Seagram officials concede that Tropicana has not done as well as they had hoped. Stephen E. Banner, the senior executive vice-president of Seagram, says, "The cash-on-cash return is in the ten-per-cent range. And it would be twelve per cent if we were not investing in international expansion. Now, is ten per cent great? No. But we're making money." Most of Tropicana's sales are in North America, and Bronfman, Jr., says, "We believe that we are well placed to make Tropicana a world brand." Last year, he notes, Tropicana netted a hundred million dollars, or about thirteen per cent of Seagram's profits. And, according to Ellen R. Marram, the president of the Beverage Group, which includes Tropicana, the juice business throughout the world is expanding by five per cent annually. "So every year the entire juice business grows more than Tropicana, which claims three per cent of the world market," she says. She believes that it is a vast potential growth business.
Bronfman's next major acquisition owes something to a 1985 trip he made to Asia as one of about thirty leading business executives--a trip sponsored by Time, Inc. In South China and elsewhere in Asia, Bronfman was stunned at the popularity of cognac--a legacy of the French colonial era--which is usually drunk with ice and water. So in 1987 he pursued the Martell family, which had been in the cognac business since 1715, and persuaded it to sell to another family-owned concern. "We'd be nothing in Asia if it weren't for Martell," McDonnell says. In ten years, he predicts, Asia will represent forty per cent of Seagram's business, with North America, South America, Europe, and Africa evenly splitting the remaining sixty per cent.
By the end of the eighties, Bronfman was pushing to identify Seagram as the home of premium brands. He realized that the profit margin for inexpensive spirits and wine is low, while better quality translates into a higher retail price and a steeper profit margin. He shed high-volume, low-end, low-profit brands. In all, by 1992 Seagram had sold twenty-three American brands, including Wolfschmidt vodka, Ronrico rum, Calvert whiskey, and the Leroux line of cordials. Seagram's North American profits broke company records last year, even though the volume of sales was down by nearly two per cent, and one reason, according to the president of Seagram North America, Steven Kalagher, was that profit margins jumped. Now Seagram sells fewer cases but makes more money.
Before the nineteen-eighties were over, one other momentous event occurred in Edgar, Jr.,'s life: he and Sherry separated. "Sherry made a perfect Hollywood wife but not a perfect corporate wife," one of her close friends says. She was said to be an attentive, caring mother of their son and two daughters but was often uncomfortable in business and social gatherings. They were amicably divorced in 1991; most mornings, Edgar, Jr., picks up and chauffeurs the children to their private schools, and on alternate weekends he drives them to his weekend home, in Pawling, New York.
BENEATH a veneer of reserve, Edgar Bronfman, Jr., is a hopeless romantic; he has written song lyrics, all of them nakedly emotional. By 1991, he had managed to establish himself in a new career, to solidify a relationship with his father, to become the leader of the Bronf-man clan. But he was lonely. A psychiatrist, he says, helped him discover that, while he could be full of ardor, he was emotionally buttoned up. "You have to open yourself up, and in doing so you create a vulnerability," he says. "I wasn't terribly good at that." He remembers that on a trip to Caracas, in late 1990, he said to the wife of a Seagram local partner, "If there's anyone as pretty as you, I'd love to meet her." That night at dinner, the local couple brought along Clarissa Alcock, a tall, lithe beauty with long dark-blond hair. She was born in Venezuela and educated in New York, Paris, and Caracas, and has a college degree in industrial relations; her father was the chairman of Petroleos de Venezuela. She belongs to a prominent Venezuelan family--one with sufficient resources to maintain a New York apartment. At that time, she was an executive in the strategic-planning division of Sivensa, the second-largest private company in Venezuela. "We didn't like each other," she says of their meeting. "It was so prepared, and it wasn't natural." They talked about Seagram's business, which bored her. Afterward, while the other couple danced, Edgar and Clarissa talked about other things. "There was a chemistry there then," she recalls.
Two weeks later, she made a previously scheduled visit to New York, and Bronfman took her to see "The Phantom of the Opera." Bronfman says, "We held hands. It was electric." For the next year, they carried on an affair by long distance. Within a month of their theatre date, Clarissa says, he had asked her to marry him, and every day for an entire year he sent flowers to her office--initially, two dozen roses, and later two dozen orchids. He didn't dare to send them to her home, for her parents, he recalls, were definitely cool to him. "First of all, an American," he says, with a sigh. "Which means that their baby, if she falls in love, leaves home. A Jewish man. That's very tough on a devoutly Catholic family. And, even more diffi-cult than that, he's divorced--which makes it impossible for her to be mar-ried in the church, or so they would have thought. Who has three children! I think for any parents watching a woman getting involved in a marriage and hav-ing to take that on as well is troubling. This is not exactly what every South American Catholic mother dreams of for her children." To test the durability of the relationship, Clarissa enrolled in a master's-degree program at New York University, starting in the winter of 1991.
Bronfman called her Chica, and she called him Chico. He eventually asked her to marry him a total of three times, she says, and each time she declined. The last time he asked, she recalls, he vowed not to ask her again until she brought the subject up. Their relationship seesawed, for she was seeking the same kind of independence that he had once sought. She did not want to be known as "the wife of . . ." She recalls, "It was scary. Always, in a foreign country, it's difficult. No matter how much I grew up in the States, and how Americanized my parents are, I was very Latin in my being. I was here alone. My family, my friends, my job were in Venezuela. Here in New York, I was an unknown person going out with someone who was very well known. Here it was always 'somebody with Edgar.' Not 'Edgar and Clarissa.' "
They broke off for three months in the summer of 1992, and then resumed their relationship. He wrote her a song, "If I Didn't Love You." Bruce Roberts, who is a friend of Bronfman's and his longtime musical partner, composed music for it. It contained these words:
I wish I wasn't breathless at the way you move
I wish I wasn't blinded by the lightning when you do
I wish you couldn't reach me in the place in my heart
Belonging only to you
If I didn't love you, I wouldn't lose control
The danger loving brings would never touch my soul . . .
If I didn't love you, if I didn't love you.
Finally, at the bar of the Carlyle Hotel in 1993, she stammered and stuttered and asked him to marry her, and he flew to Caracas to ask her father's permission. They were married in Caracas last February, by a priest and a rabbi, and Sam Bronfman was the best man. Then Bruce Roberts sang "If I Didn't Love You" to the newlyweds as they danced before twelve hundred guests in the garden of her grandmother's estate.
Bronfman felt that the void was filled--that his professional and personal lives had fused. "It is her personal stature that allows Edgar to sit at the table with her and for there to be two Bronfmans at the table," observes Paul B. Ford, Jr., who is a partner at Seagram's law firm, Simpson Thacher & Bartlett, and represented Bronfman, Jr., when he was in the entertainment business, and who remains one of his closest friends. "He has a partner. While she is very much a part of Edgar's life, she has her own life. In a very Confucian way, you must have your house in order if you are to be great. Edgar has his house in order."
BY late 1991, Edgar Bronfman, Jr., had begun to search for another kind of partner--one for Seagram. The business was profitable: Seagram had an operating income last year of seven hundred and fifty-four million dollars. With years to go before the spirits and beverage businesses in Asia and elsewhere overseas might appreciably boost corporate profits, with the over-all wine-and-spirits business already mature, and with DuPont earnings flat, Bronfman undertook a search for the kind of investment his father had made in DuPont. "We looked at a lot of areas," says Stephen Banner, who had shepherded Seagram's business as a Simpson Thacher partner before joining the company, in 1991, and becoming its chief financial, legal, and strategic-planning executive. "First, we looked at our basic business. We concluded that it was unlikely that there would be an opportunity of a megabillion size." They also looked at the fragrance and luxury-goods businesses, among others, he continued, and then "we became convinced that the communications-media-entertainment area was one in which a lot of money would get made." Michael Ovitz, the chairman of the Creative Artists Agency, whose father had worked for a Seagram's distributor for more than forty-five years, and who had met the Bronfmans years ago, analyzed this growing sector of the economy for Seagram. In the summer of 1992, over dinner at Bronfman, Sr.,'s home in Sun Valley, Idaho, Ovitz made an informal presentation on the future of the communications revolution. The dinner was attended by Sam and Edgar, Jr. Ovitz later made a more formal presentation to the Seagram board. The following winter, Herbert Allen, Jr., of Allen & Company, who has specialized in entertainment-industry mergers, was invited to Seagram's Park Avenue office to share his thoughts. Bronfman, Jr., also explored the matter with several of Seagram's longtime investment advisers--Felix Rohatyn, of Lazard Freres, and bankers at Goldman, Sachs.
The four appraisals pointed in the same direction: the communications business would grow very fast, and the future would belong to those information-and-entertainment companies which controlled content. "There was a fair degree of unanimity that this industry would have dynamic growth for the foreseeable future," Bronfman, Jr., recalls. "Probably more than any other single industry." Ideally, Seagram should invest in a company that manufactured for a variety of entertainment/information outlets--from movies to television to music to print, Seagram concluded, and that specification narrowed the choice to a Hollywood studio. Neither of the two Japanese-owned entities--Sony and M.C.A.--was for sale. Rupert Murdoch was not about to sell Twentieth Century Fox. Disney had strong management, a formidable stock price, and the protection of a nearly one-fifth ownership by the investor Sid Bass. Each was probably impregnable to a takeover. Besides, according to Ovitz, "there was never any discussion of a hostile takeover." This left two candidates: Viacom, which owns Paramount, and Time Warner. While Paramount was attractive, it was thought to lack the range of assets enjoyed by Time Warner: Paramount didn't own a music business; it didn't own comparable cable-programming assets; and it didn't own magazines. And its management was generally thought to be inferior to Time Warner's.
Steve Ross, the Time Warner chairman, had decided not to sell any assets to help reduce his company's fifteen-billion-dollar debt load--a move that his former co-C.E.O., Nicholas Nicholas, had advocated. Ross wanted to sell minority ownership in the core businesses. In 1992, Ovitz offered to visit with Ross, whom he knew, to explore an equity investment. Without ever mentioning the name of the company he was representing, Ovitz went to see Ross at his house in East Hampton. (The date of the meeting is disputed, with people at Seagram believing that it was in September of 1992, and Time Warner sources insisting that it was closer to the spring of that year, because by September Ross had been severely weakened by cancer and was not receiving visitors.) Nothing came of the meeting.
By December of 1992, Bronfman, Jr., had come to a conclusion so obvious that more experienced investors overlooked it. Investors agreed that Time Warner owned a brilliant array of diverse assets. They agreed that it was a global colossus, and that acquiring the entire entity was out of the question--it was too expensive and they shied from a hostile attack. What Bronfman, Jr., and his advisers saw was that Time Warner need not be swallowed whole for an investor to benefit from its potential growth. Time Warner didn't have an owner; it was run by managers. None of its various shareholders held a dominant minority position; none were represented on the board. Seagram saw an open parking space just waiting to be filled.
In February of 1993, the Bronfmans persuaded the Seagram board to approve the secret purchase of as much as 4.9 per cent of Time Warner's stock, or just under the five-per-cent threshold that would require public disclosure. The reason to buy quietly, Herbert Allen, Jr., says, is simple: "Why tell the market you're buying stock and drive the price up against yourself?" From the moment Seagram began buying stock, that month, until its purchases were disclosed, in May, Time Warner knew nothing of this activity. Nor did it know of another decision made by the Seagram board, later that winter--to expand the initial investment to as much as fifteen per cent of Time Warner shares.
"The moment we crossed"--acquired more than five per cent--"I called Jerry," Bronfman, Jr., says. "I told him we thought he was running a terrific company. We thought we'd like to buy up to fifteen per cent of the shares. This is a benign investment." It was the same kind of "passive investment" that Seagram had made in DuPont, he told Levin. Although Levin was dubious, he thanked Bronfman for the courtesy, and released a statement welcoming the investment. In the coming months, Seagram continued to accrue Time Warner stock. The presence of an uninvited guest provoked an intense debate within Time Warner: doves said that the company should take the Bronfmans at their word and seduce them into the tent, and hawks said that it should not act on their hopes but should instead prepare for battle. At first, Levin did not choose sides. He had just finished reducing the membership of the Time Warner board from twenty-four to eleven. (It is now fifteen.) He had discarded many insider directors. He had always opposed poison pills. It wasn't that Levin was soft, for he had not hesitated to snatch power and supplant first Nick Nicholas and then Steve Ross's retinue. But to install defenses against the Bronfmans would be to assail the logic of what he had already done.
Still, the arguments of the hawks prevailed. According to insiders, the Warner-studio chairmen and co-C.E.O.s, Robert Daly and Terry Semel, and HBO's head, Michael Fuchs, were joined by representatives of investment funds like the Capital Group, which owned nine per cent, and by U S West, which had invested two billion five hundred million dollars in Time Warner Entertainment. Each made the same argument: If we avert our eyes, the Bronfmans can pull a Tisch, gaining control of the company without paying for all the stock. The Bronfmans had a plan to dominate the company, one hawk said. "No one spends one billion nine hundred million dollars to sit by the side of the road," another said. "And this is show business."
The more Levin and Time Warner studied Seagram's past, the more anxious they became. They noted that Seagram had not always made "benign" investments. In 1981, Seagram launched two takeover bids that turned hostile. The first was for the St. Joe Minerals Corporation, and resulted in a bidding war won by the California-based Fluor Corporation. The second was for Conoco, Inc., which was bought by DuPont, with Seagram's Conoco shares converted to twenty-five-per-cent ownership of DuPont. The Bronfmans claim that the DuPont investment is passive, because they do not intrude in the management of the company, but many at Time Warner have maintained that it is not so passive. What unnerves Time Warner about the DuPont investment is contained in fine print in Seagram's latest proxy statement: "The Corporation has the right to designate 25% of the members of the DuPont Board of Directors." (Time Warner officials tend not to mention the fact that DuPont gets to nominate two members to the Seagram board, including DuPont's chairman.) The fine print also requires the approval of Seagram before DuPont may sell more than twenty per cent of its voting stock, or dilute Seagram's ownership by issuing more stock without Seagram's consent.
Time Warner's suspicions were fuelled by Michael Ovitz. Executives at the highest levels of Time Warner believe that Ovitz, who has not been paid by Seagram (although a C.A.A. official does not rule out a future financial arrangement), has set out to "destabilize" their company, because he wants Levin's job. According to well-placed Time Warner sources, Daly, Semel, and Fuchs have complained to him in private meetings.
There have been "civil" discussions, not complaints, sources close to Ovitz say. "Let's separate rumor from reality," Ovitz says. "The rumor mill has had me running first Sony, then M.C.A. Next came M-G-M. And now Time Warner. None of this has come to pass, because the reality is I'm in a great situation here at C.A.A. Our work with these other companies helps to stabilize markets for our clients and, by the way, for everyone else's clients as well. The reality is: We are building our own company, C.A.A., for the future."
The suspicions--what one friend of Bronfman's refers to as Iago-like paranoia--prompted Time Warner's board, on January 20th, to adopt the poison pill that might make it more difficult for Seagram to acquire more than fifteen per cent of the company's stock. When Bronfman, Jr., heard rumors the night before the board was scheduled to vote, he phoned Levin. "What's going on?" he remembers asking.
"I can't discuss it with you," Levin replied.
"Better if you tell me, so that I don't read it in the paper."
"I'm in a difficult position," Levin responded. "I can't discuss what my board may or may not do."
The next day, Levin phoned to tell Bronfman that the board had instituted such a takeover defense, but noted that it would not affect Seagram, because Seagram had said it didn't plan to buy more than fifteen per cent. Bronfman responded that he did not believe in poison pills. Bridling because Seagram had not been consulted--as Levin had bridled because he was not consulted when Seagram decided to buy his stock--Bronfman decided to issue a public statement. He says that in it he tried "to be as gentle and non-inflammatory as is possible under the circumstances." While the statement noted that Seagram had not yet read the details, it declared, "As a general matter, however, we believe that Rights Plans, or so-called 'poison pills,' can interfere with shareholder choice and adversely affect shareholder values" by depressing the stock price.
Now Levin was angry, and he phoned Bronfman. "He was incensed that we would make a statement that was anything but wholly supportive of Time Warner management," Bronfman recalls.
"Jerry, I did and do disagree about the Rights Plan. But we have disagreed about nothing else," Bronfman said.
That is plainly wrong. They disagree, fundamentally, about Seagram's intent. Also about whether Seagram is just another shareholder or a partner of Time Warner's. While Seagram hasn't previously divulged this, it might be willing to sign a standstill pledge, as it did with DuPont. But in return it would want to be accorded the respect of a principal, and to receive at least a couple of seats on the Time Warner board. That's what Edgar Bronfman, Sr., calls for, and he adds, "If they want to have an honest discussion about shareholder values, I'm perfectly willing to have an honest discussion, with him or anybody else. If I were in his shoes, that's probably what I would do. But then I'm not as scared of me--or of Edgar--as Jerry Levin is."
Time Warner officials are today adamantly opposed to inviting a Seagram representative to join the board. "He has to demonstrate to us he is worthy," a Time Warner board member said of Bronfman, Jr., in February. "He has to prove it. He can't buy his way on." In the months since, that view has hardened. A Time Warner executive who is not a member of the board but reflects the prevailing view at the company said, "We have bigger partners than Seagram. U S West has more money invested than Seagram, yet they're not on the Time Warner board." And a standstill? Time Warner's attitude is that a standstill is unnecessary, because it implies a negotiation, and there is nothing to negotiate.
Inevitably, the absence of true dialogue encourages sniping. Some Time Warner officials sneer at "the alleged" kidnapping of Sam Bronfman in 1975. (The two men accused of abducting him were convicted of grand larceny, not kidnapping.) It is said by people at Time Warner that Edgar Bronfman, Sr., is "a loose cannon." Edgar Bronfman, Jr., is said to be "a rich kid" enamored of Hollywood. Seagram executives, in turn, assert that Nick Nicholas was right to want to sell off some of Time Warner's lesser assets to pare its debt, as Viacom is now doing to help digest its acquisition of Paramount. If Levin had asked Edgar, Jr., to support him before a proxy fight over whether directors' terms should be staggered, a top Seagram official says, Edgar, Jr., might have acquiesced rather than align his shares with dissidents at Time Warner's annual shareholder meeting on May 19th. And Seagram executives ask incredulously, "Did you see Time Warner's proxy statement?" They note that although the company reported a loss, before "unusual and extraordinary items," of ninety-four million dollars last year, the proxy shows that Levin received a four-million-dollar bonus, up from two million five hundred thousand dollars the previous year. Bronfman, Jr.,'s bonus last year was nine hundred and sixty-two thousand six hundred dollars.
Despite this climate of potentially corrosive wariness and mistrust, both Seagram and Time Warner say they are trying to advance what Steve Banner calls "the comfort level." Neither Bronfman nor Levin wants a public squabble. Each is a gentleman. But there remains a gulf between them, because each wants a distinctly different relationship: one wants to marry, the other would like to end the affair but can't. So they date, chatting occasionally on the telephone; they have lunch, the last two times in the very public arena of the Grill Room at the Four Seasons. Both men have told associates that their discussions are somewhat stilted. Reports from both sides go as follows: Levin tells Bronfman he has no intention of inviting him to join Time Warner's board; Bronfman says he hasn't asked. Levin says one of his partners, U S West, is concerned about Seagram's intentions; Bronfman offers to meet with U S West but gets no response. Levin mentions that the federal government's rollback of cable prices has retarded Time Warner's ability to invest in undervalued cable properties; Bronfman says Seagram might be willing to put up money to assist these investments, but Levin lets it slide. Levin extolls Warren Buffet as a model investor, mentioning his passive investment in Capital Cities/ABC, where he ceded his proxy to ABC's chairman, Thomas Murphy, and its president, Daniel Burke. But "that's because he had a dialogue with Burke and Murphy," Bronfman said to me. "I have not had that kind of dialogue with Jerry." The relationship is combustible. As Levin keeps Bronfman at a distance, Seagram officials sense that he is condescending. Inevitably, it may be felt that he is treating Edgar Bronfman, Jr., as "the son of . . ."
Also at variance are the two sides' perceptions of the current relationship. Time Warner feels that it has blocked Seagram, spurning its effort to be treated as a partner. "They're frozen at fifteen per cent," an important Time Warner executive asserts. "If Bronfman wants it now, he won't get it." The prevailing view among Seagram executives is that the company has already established itself. Levin may not like it, but he is stuck with Seagram as a partner, company executives believe.
Perhaps in the short run Levin has stymied Seagram. Even if Seagram executives wanted to--and they insist they don't--they concede that their company cannot afford the more than thirty billion dollars it would cost to ingest Time Warner and its poison pill. But if this places Levin temporarily in the driver's seat, it is also a hot seat. The core question lingers: Can Levin and Bronfman establish a relationship of trust? The risk for Levin is that he may have made himself hostage to events he can't always control. If Time Warner stock drops, if anticipated profits don't materialize, if a controversy or a scandal in one of the company's divisions erupts, Levin's seat gets hotter. And if Seagram is on the outside and can say "I told you so," then shareholders might turn to it as a savior, or might insist that Levin bring it inside in an effort to boost the stock price.
The simple truth is that Levin cannot yet advance the argument that Steve Ross's supporters once did--that he's indispensable. Levin is a man of keen intelligence, and has an attractively modest mien. He can articulate a vision better than Steve Ross did, but, unlike Ross, he does not have a personality that fills a room. His management style is to delegate to assertive, capable executives. One result is that Levin is perceived as being less indispensable than, say, Robert Daly or Michael Fuchs. If Time Warner's stock price drops, a prominent entertainment executive who respects both Levin and Bronfman says, "At that point, poison is something that management will drink."
For Seagram, the major short-term pressure involves what is called equity accounting, or an investor's ability to count a proportionate share of an investment's earnings on its balance sheet. Seagram, for example, counts twenty-five per cent of DuPont's earnings as its own. Generally, a company may not employ equity accounting unless it owns at least twenty per cent of another company. This limitation would provide a real incentive for Seagram to raise its stake in Time Warner. But since Time Warner is struggling with its major debt, and lost money last year, equity accounting is not currently an issue. If Time Warner enjoys record earnings, which Levin projects for this year, then the short-term pressures on Seagram to boost its stake will grow.
In the long run, time may be Seagram's ally. Because Seagram is a family-owned and family-run business, with six Bronfmans on its board, it has the luxury of patience, of being unintimidated by short-term fluctuations in profits or in the stock price. Ellen Marram, of the Beverage Group, says that a great difference between working at Seagram and working at Nabisco Foods or Lever Brothers or Standard Brands, at each of which she has also been an executive, is that a family-owned company "can think on a much longer-term basis--the company itself is more of an extension of who they are." Seagram has various options. Over time, it could establish a comfortable partnership with Levin and Time Warner. Failing that, it could undertake guerrilla warfare, mounting proxy fights at the annual meeting. Or it could wait to be approached by other major or future shareholders, who want to join forces, as happened in 1986, when Laurence Tisch and the late William Paley jointly ousted Thomas Wyman as the chairman and C.E.O. of CBS. The person most often mentioned as such a partner is Bronfman, Jr.,'s friend Barry Diller, and he maintains, "We have not talked about Time Warner. We both know it would be inappropriate." Seagram could also join with others to make an all-cash offer, which would not trigger the poison pill.
Time Warner is not without some leverage. It could continue its present arm's-length approach, and perhaps time will dissolve tensions. Perhaps not. It could pursue Bronfman's feeler and ask Seagram to make an equity investment. It could reverse course and embrace the Bronfmans. It could go on the offensive, making the argument that Seagram's interests are not consonant with the interests of Time Warner shareholders; if Seagram wishes to purchase more stock or gain control, it wants the stock price to fall, so Seagram pays less, while all other Time Warner shareholders want the price to rise. It could, to block Seagram, offer to sell the company to a white knight, with its current partner U S West often cited as a possibility. No matter what happens, Edgar Bronfman, Sr., told me, Seagram's Time Warner investment is "designed to end up so that Seagram's shareholders are going to make a lot of money."
IN Edgar Bronfman, Jr.,'s comfortable office, five stories above Park Avenue, there are two framed letters signed, simply, "Tree." One, a short, handwritten letter, stands on a table beside a brown leather couch, and the other, which is typed, stands on a credenza under a Joan Miro canvas and faces an antique writing table that Bronfman, Jr., uses as a desk. The letters are from his father, whom Edgar, Jr., sometimes calls Tree. (At their Westchester home, when young Edgar sat in his father's chair Edgar, Sr., would bark, "Get out of my tree!") The letters warmly thank Edgar, Jr.--for justifying a father's business faith in his son and for an affectionate and glowing speech that Edgar, Jr., made in May of 1991, on the occasion of Edgar, Sr.,'s fortieth year at Seagram. "Those are the kind of letters he never got from his father," Bronfman, Jr., says. In Edgar, Sr.,'s office, just down the corridor, a bronzed copy of Edgar, Jr.,'s speech hangs on an oak-panelled wall. When Bronfman, Sr., is asked how he felt when his son stood before the company and declared his love and admiration, tears flood his eyes, and he does not--cannot--speak.
Father and son are united, and Edgar Bronfman, Sr., says that at the board meeting and then at the annual assemblage of Seagram shareholders in Montreal on June 1st, "I will tell the directors that I intend not to stand for reelection. I will say this at the annual meeting. And then I will recommend--and they will do as they please--that my son be my successor."
Can the kid who craved the creativity of the entertainment business be happy as an adult who spouts business lingo and runs Seagram? Bronfman, Jr., attacks the assumption behind the question.
"I reject the notion that business and creativity are mutually exclusive," he says. "I think I've been a reasonably creative president of this company. I think we have fundamentally altered the direction of this company in the last five years. . . . I don't lack for creative outlets."
Nor, he goes on to say, does he lack for a higher purpose, and that is how the adult Edgar squares with the young Edgar. "It really goes back to what my grandfather built. And what my father and uncle enlarged," he says. "I knew that when I grew up I would be financially secure. Having that sense of financial security made it possible for me to be 'brave,' to go out and try new things and be 'different.' It's easier to be different if you know that there's a net underneath the wire. For reasons that I suspect my psychiatrist can explain better than I, I find it enormously important that my brothers and sisters and cousins, my children, my nieces and nephews, feel that same sense of security. Because I want them to have the freedom that I had. And I get enormous personal satisfaction in being a part of that for them. And so, when I try and square where I am and where I was, I think I'd be having a lot of fun there--but it would ultimately feel frivolous. It would ultimately feel that I had shirked a larger and more important responsibility, and that would sour whatever pleasure would exist in that other life." (c)