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In June 2000, Edgar Bronfman Jr. was making international headlines. He had just sold The Seagram Group, of which he was president and CEO, to French media giant Vivendi. Almost eighty years earlier, Seagram had begun as a small...
In June 2000, Edgar Bronfman Jr. was making international headlines. He had just sold The Seagram Group, of which he was president and CEO, to French media giant Vivendi. Almost eighty years earlier, Seagram had begun as a small Montreal liquor store opened by the legendary Samuel Bronfman after he noted that the booze business was more profitable than his father's trade in horses and frozen fish. Samuel had transformed that small operation into a multi-billion-dollar international empire, the world's largest distiller.
If Sam was the mercurial and implacable entrepreneur, his son Edgar was the sound managerial custodian of the dynasty, expanding Seagram's whisky into new markets and diversifying into oil and real estate. The Bronfman empire seemed unshakable.
Then, in 1995, Edgar Jr. moved the family business from Canadian whisky to the international entertainment world with the purchase of Universal Studios and Universal Music. Meanwhile, Jean-Marie Messier, head of Vivendi, had shifted his old-economy company from the water-filtration business to the glittering world of media and entertainment. Together, Vivendi-Universal would be the world's second-largest media group.
The $30-billion all-stock deal seemed like the perfect merger, and the incarnation of a new business model. But investors weren't so sure. Stock values for both companies began to drop as soon as rumours of the merger started to circulate. And thenew company started losing staggering sums almost immediately: $14 billion in 2001, and $24 billion in 2002. Bronfman resigned from his position as vice-chairman, while Messier was publicly sacked.
The merger was soon deemed a spectacular failure. Bronfman had sold the company founded by his legendary grandfather, squandered three-quarters of the family fortune, and forfeited most of his executive power. Meanwhile, the $5.7 billion stake in Dupont he had sold to pay for Universal had risen in value to over $19 billion two years later. Business Week featured the young Canadian scion on its "Worst Managers List," calling him the "most desperate billionaire around."
In this unauthorized biography, acclaimed and award-winning business writer Rod McQueen tells the gripping story of ambition and family loyalty from its beginnings in the aspirations of Samuel Bronfman, the son of a Russian Jewish immigrant. Samuel had a theory: that family dynasties are built and lost in three generations.
Edgar Jr. is the third generation, and he is in the fight of his life to prove his grandfather's predictions untrue. In The Icarus Factor, Rod McQueen tells the story of this extraordinary family and its business empire, from its rise to what may turn out to be its fall.
That which you inherit from your fathers, you must earn in order to possess.
The two chief executive officers were perched on stools at the Internet Café in Paris. Edgar Bronfman Jr. looked formal, even European, in his Armani suit. In a classic case of role reversal, Vivendi chairman and CEO Jean-Marie Messier had taken off his suit jacket as if he were trying to emulate an American businessman ready to roll up his sleeves.
As the third-generation CEO of the family-controlled Seagram Co., Edgar Jr. had his heritage very much in mind that morning. Before the two men announced the $34-billion merger of their two companies, Edgar Jr. took Messier aside and told him, “You know what they say in the U.S. about entrepreneurial families? The first generation creates, the second makes the fortune, and the third destroys it. I represent that third generation. But with this, I’m assuring the future of the generations to follow.”
Even the date was auspicious. June 20, 2000, was the seventy-first birthday of Edgar Bronfman Sr. “I can think of no better present to give my father, his children, his grandchildren, and his great-grandchildren than this world-beating company we are creating today,” said Edgar Jr. at the news conference. “I’m proud of what we’ve accomplished. It completes Seagram’s translation from a traditional company into a leading force in the global media and entertainment industry.”
Edgar Jr. had indeed done well. In 1994, when he succeeded his father as CEO, the family’s Seagram shares were worth $4 billion. In June 2000,based on the negotiated price per share of $77.35, the family’s holdings had doubled in value to $8.2 billion. Mind you, the broad measure of the stock market — the Dow Jones Industrial Average — had almost tripled during the same six-year period. Still, praise for Edgar Jr., who in the past was widely criticized as a naive dilettante, had never been so fulsome. “Bronfman, one of Hollywood’s favorite punching bags, may finally get some respect,” said Betsy Streisand in U.S. News & World Report. “If they ever erect a family business hall of fame, the Bronfmans should be a shoo-in on the first ballot,” wrote Gordon Pitts in The Globe and Mail. “Few could match their accomplishments: They guided their liquor giant Seagram Co. Ltd. into the third generation; rebuilt its business model; and sold when the time seemed right, amply rewarding family and non-family shareholders.”
Editorial writers at The Gazette in Montreal, the city where Seagram’s head office had been located for more than seventy-five years, were not so sure. “It’s the end of an era in Canadian business. The deal is a confirmation of Samuel Bronfman’s concern . . . that the financial colossus he built might not survive the third generation,” said The Gazette. The editorial paid tribute to the legacy of Mr. Sam, as he was called, congratulated the second generation for their philanthropy, but damned Edgar Jr. with faint praise. “The high price for the company is seen by some as a vindication of chairman Edgar Bronfman Jr.’s strategy to transform it into an entertainment giant in the six years he has run the company.”
The Gazette was wise to withhold applause. Within two years, Vivendi Universal became crippled by $19 billion in debt, the share price plummeted, and the high-flying Messier was ousted. What was supposed to be the capstone of Edgar Jr.’s career would instead become his epitaph. “There’s something in life called The Great Equalizer. I don’t know what it is, I don’t know where it is, I don’t know how it is,” says David Culver, former CEO of Alcan Aluminum Ltd. and a long-time Seagram director. “I only know one thing about The Great Equalizer. If you’re flat on your back on the floor, He’s paying no attention. But if you’re on the cover of Time magazine, He’s waiting there. I think it happened to Edgar Jr. The history is there. How many billion dollars has the family lost? That’s The Great Equalizer at work.”
Because the Bronfman family swapped all of their Seagram holdings for shares of Vivendi, the losses were devastating. From that peak of $8.2 billion, during the next two years the value of those family holdings, including proceeds from shares they sold along the way, fell by almost three-quarters to $2.2 billion. Mr. Sam had predicted this dynastic tragedy in a 1966 interview with Fortune. “Members of a family don’t want to work as hard as employees — and you can’t fire them. I tell my sons and son-in-law that they have to think about what the little children will do. The thing is that it depends on how those little minds develop. You’ve heard about shirtsleeves to shirtsleeves in three generations. I’m worried about the third generation. Empires have come and gone,” said Mr. Sam.
The sale of Seagram and the financial ruin that followed is too much for the old-timers, who blame Edgar Sr. for letting his son run amok. “Even to this day Senior thinks Junior is a genius. I think his admiration of his own son exceeded his good judgment,” says Mel Griffin, who joined Seagram in 1945, rose to become a senior officer and director, and then retired in 1988. “I don’t know whether he recognizes that his son has wrecked the company.” As for what Mr. Sam might think, “He’d be rolling in his grave, I’m sure. He was pretty single-minded about Seagram and the liquor business. There’s hardly anything left of the Seagram Co. I knew,” says Griffin.
Mr. Sam, who died in 1971, has no equal in Canada as an entrepreneurial founder and family business leader. Through sheer determination, gut instinct, and a few corners cut as far as the law was concerned, Mr. Sam made Seagram a household word in more than 150 countries. George Weston, who started a biscuit company that became a food conglomerate, and Roy Thomson, in media and oil, also launched vast Canadian-based global family empires that prospered into the third generation, but both of those families relied on professional management. Seagram was different. The Bronfman family not only maintained control of the company but also held the top job into the third generation. Everything went well until Edgar Jr. sold his heritage with such disastrous results.