Transaction Creates Global Entertainment Leader World’s Largest Music Company

Seagram to Sell Tropicana Through IPO To Unlock Full Value For Shareholders

Philips to Invest Up to $2 Billion in Seagram

MONTREAL, May 21, 1998 — The Seagram Company Ltd. today announced that it hasreached an agreement in principle with Royal Philips Electronics N.V. andPolyGram N.V. to acquire PolyGram in a transaction valued at $10.6 billion.PolyGram will be combined with Universal Studios, Inc., Seagram’s entertainmentsubsidiary, upon completion of the transaction. The combination would create theworld’s largest music company, and a global entertainment leader.

Seagram said that Universal would acquire Philips’ 75 percent ownership positionin PolyGram through a tender offer for all issued shares, including publicly-heldshares, for NLG 117, or approximately U.S. $59 per share in cash or, at theshareholders’ election, for cash and Seagram common shares. The agreement inprinciple calls for Seagram to issue a maximum of approximately 47.9 millioncommon shares (12 percent of the outstanding shares after the transaction), orapproximately $2 billion in value.

The Board of Directors of Seagram and the Board of Management and the SupervisoryBoard of Philips each unanimously approved the agreement in principle, and theBoard of Management and the Supervisory Board of PolyGram each has unanimouslyrecommended the proposed offer as fair and in the best interests of PolyGramshareholders.

Separately, Seagram’s Board of Directors authorized the sale of TropicanaProducts, Inc. through an initial public offering of common stock. The Companysaid it was selling Tropicana as part of its continuing effort to realign theCompany’s assets as well as to realize the subsidiary’s full value for Seagramshareholders.

Edgar Bronfman, Jr., President and Chief Executive Officer of Seagram, said:””These announcements herald an important transformation of Seagram. We willmanage two highly-focused businesses of global scope and scale — entertainmentand spirits and wine. With the acquisition of PolyGram, we become a globalentertainment leader, including the world’s largest music company, with a trulyimpressive roster of musical talent. We’re delighted to be buying the world’spreeminent music company and to be able to integrate it with Universal at anestimated cost savings of $275-$300 million annually.””

Mr. Bronfman continued: “”While we become predominantly an entertainment companyas a result of these transactions — with nearly 75% of our attributed EBITDAderived from our entertainment assets — we remain as committed as ever to ourspirits and wine businesses, which have defined this Company and fueled itsgrowth for more than three generations. Its premium brands, global distributionand consistent cash flow remain an important contributor to the Company’s growthand operations.””

Frank J. Biondi, Jr., Chairman and Chief Executive Officer of Universal Studios,Inc., said: “”The addition of PolyGram to Universal’s operations moves us to theforefront of the entertainment industry. Universal will now operate the largestmusic company in the world, the second largest theme park resort company, a majormotion picture studio, and a worldwide television production and distributionbusiness. And our 45% equity interest in USA Networks gives us exceptionalopportunities in domestic television and electronic commerce.””

Cornelis Boonstra, President and Chief Executive Officer of Philips, said: “”Thistransaction allows Philips to focus its resources on achieving world-class statusin its core businesses. With the divestment of its stake in PolyGram, Philipswill have accomplished its main objectives in the restructuring of the company. Philips will now be in a strategically strong position to further build on thecore competences of the organization. This transaction offers PolyGram new andexciting opportunities to grow within a focused entertainment culture.””

The agreement in principle also contemplates that Philips would irrevocablycommit to tender all its PolyGram shares into the Seagram tender offer, toacquire as many Seagram shares as are available in the tender offer, and to holdits Seagram shares for no less than two years.

Seagram said that upon the closing of the transaction, Mr. Boonstra would joinSeagram’s Board of Directors.

Seagram said that Tropicana will file shortly with the Securities and ExchangeCommission a Registration Statement for the public offering of 100 percent ofSeagram’s interest in Tropicana. Proceeds from the sale would be used topartially fund the acquisition of PolyGram. Seagram estimates a value of U.S.$3.5 billion to $4.0 billion for the Tropicana subsidiary, making the sale one ofthe largest U.S. initial public offerings. This offering of Tropicana commonstock will be made only by means of a prospectus.

Mr. Bronfman said: “”We’ve been extremely pleased with the performance ofTropicana, which we bought for $1.2 billion in 1988. But as Tropicana grew into amore valuable asset, we concluded that the increased value was not being fullyreflected in Seagram’s share price.””

Mr. Bronfman added: “”While the timing of today’s announcement regardingTropicana will certainly help facilitate the PolyGram transaction, it isimportant to note that we would have found a way to realize the full value ofTropicana for our shareholders even without the PolyGram transaction.””

The balance of the funding for the acquisition of PolyGram will come fromborrowings and potential asset sales, including the sale of PolyGram’s FilmedEntertainment Unit. Mr. Bronfman said: “”Philips, PolyGram and Seagram willexplore the possibility of a sale of PolyGram’s film properties. We believethese properties represent significant value and we may be able to furtherenhance their value to our shareholders by selling these assets.””

Universal Studios also said today that the management of Universal Studios andPolyGram would meet immediately to identify the management team that would leadthe various units of the combined company.

This announcement does not constitute the making of a tender offer for PolyGramshares. The agreement in principle and Seagram’s obligation to commence a tenderoffer (and the tender itself) will be subject to customary conditions, includingexecution and delivery of definitive agreements, preparation of the offeringdocuments, and obtaining necessary regulatory and other approvals, including theexpiration of all applicable waiting periods under the Hart-Scott-RodinoAntitrust Improvement Act of 1976, and approval by way of a decision of theCommission of the European Communities. The PolyGram transaction is expected toclose within four to six months.

Morgan Stanley & Co. Incorporated and Bear, Stearns & Co. Inc. served asfinancial advisors. Simpson Thacher & Bartlett served as legal counsel.

The Seagram Company Ltd. operates in two global business segments: beverages andentertainment. The beverage businesses are engaged principally in the productionand marketing of distilled spirits, wines, fruit juices, coolers, beers andmixers throughout more than 150 countries and territories. The entertainmentcompany, Universal Studios, Inc., produces and distributes motion picture,television and home video products, recorded music under the Universal MusicGroup, which includes MCA Music Publishing and Universal Concerts, and suchlabels as MCA Records, MCA Records Nashville, GRP Recording Company, GeffenRecords, Universal Records, Interscope Records, and Hip-O Records; and operatestheme parks and retail stores. Headquartered in Montreal, Seagram employs 30,000people worldwide. The Company’s corporate website is located at

PolyGram is a global entertainment company with annual revenues over $5.5billion. It is the world’s leading record company with such pop and classicalrecord labels as A&M, Decca/London, Def Jam, Deutsche Grammophon, Island, London,Mercury, Motown, Philips Music Group, Polydor and Verve. Through its PolyGramFilmed Entertainment division, PolyGram is also a leading producer anddistributor of film, television and video. Its film companies include GramercyPictures, Interscope Communications, PolyGram Films, PolyGram Television,PolyGram Video, Propaganda Films and Working Title Films. PolyGram is quoted onthe Amsterdam and New York stock exchanges (PLG). PolyGram’s U.S. website is

Royal Philips Electronics N.V. of the Netherlands is one of the world’s biggestelectronics companies, with sales of over US $39 billion in 1997. It is a globalleader in color television sets, lighting, home telephony products, electricshavers and recorded music (PolyGram). Its 264,700 employees in more than 60countries are active in the areas of semiconductors and components, consumerproducts, professional products and systems, lighting, and software and services.Philips is quoted on the New York, London, Frankfurt, Amsterdam and other stockexchanges. News from Philips is located at

The statements in this release relating to matters that are not historical factsare forward-looking statements that are not guarantees of future performance andinvolve risks and uncertainties, including but not limited to future globaleconomic conditions, foreign exchange rates, regulatory approvals, marketconditions, the actions of competitors and other factors beyond the control ofthe Company.