Dysfunctional Family Businesses: Seagrams

Minyanville Staff  Jun 30, 2009 8:25 am

Dysfunctional Family Businesses: Seagrams
 
The heir apparent drinks the family fortune.
 

First there was Sam.

The patriarch of the Bronfman family had all the drive and desire of a young Russian immigrant in the fledgling years of the 20th century.

He developed a taste for the alcohol trade during the prohibition era,
 
 
 
 
 
 
 
 
 
 
 
and exploited laws and loopholes in Canada and the United States for certain gain. From its outpost in Montreal, his Distillers Corporation Limited would run liquid courage to nearby US cities like New York and Boston.

In 1928, Distillers acquired Joseph E. Seagram and sons, a distillery in the Canadian province on Ontario, opting to do business under this new banner.

At its height, Seagram counted among its products Chivas Regal, Crown Royal, Martell, Absolut, Captain Morgan and Tropicana Pure Premium Original Orange Juice (because a screwdriver doesn’t just make itself).

Today, the family business is a shadow of its former self.

Succession was disorderly, egos were outsize and mistakes were made with a spectacular lack of foresight.

In 1957, Sam’s son Edward took the reins. And, as it does for so many with deep pockets, Hollywood glamor proved hard to resist.

At Edward's behest, Seagram bought $40 million in MGM (MGM) stock - a raw deal that ultimately cost the company $10 million.

Seagram Sam Bronfman II, Georgiana Bronfman, Edgar Bronfman Senior
In 1975, in a story that played out in all the tabloids, a Brooklyn fireman named Mel Patrick Lynch allegedly kidnapped Edger’s elder son, Sam Jr. Lynch claimed he and Sam were lovers and that the kidnapping was an elaborate attempt by the Bronfman heir to get his hands on the family fortune. Father and son dismissed the claims out of hand; Lynch was charged with extortion.

But it’s worth noting that Sam Jr., despite his enviable place in the family bloodline, wasn't tapped as his father’s successor.

That task would fall to brother Edgar Jr., who took over Seagram in 1994, at a time when the company’s 25% stake in chemical giant Dupont (DD) -- a deal engineered by his old man -- accounted for 70% of its earnings.

In some ways the apple fell far from the tree. In others, not so much. However enamored Edgar was of Hollywood, the entertainment business had a gravitational pull on Edgar Jr.

In a move still ridiculed in corporate circles today, he indulged his whim by selling back the Dupont shares to raise capital for the purchase of MCA (which took the name Universal after Universal Studios and its theme parks). Family members, including his uncle Charles, were reportedly “appalled” even though they reluctantly went along with the decision.

Bronfman family lore holds that father told son: “It’s a lot of money to get laid.” Of course this can’t be substantiated.

Five years later, in 2000, Edgar Jr. sold Seagram, along with its storied liquor holdings, to French media conglomerate Vivendi, which many took as yet another sign that the heir apparent was a poor choice for CEO.

After the usual pomp and circumstance about how super terrific the marriage of Vivendi to Universal would be, he resigned the executive vice-chairmanship.

Amid the Bronfman family’s dwindling holdings (and much ill will from cousins in both Canada and the US), Edgar Jr. acquired Warner Music Group (WMG), where he currently serves as Chairman and CEO and oversees a roster of talent that includes crooner Michael Buble and Rob Thomas.

It’s a long way from the from the frozen streets of Montreal where his grandfather first bottled whiskey.

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