Act 2: new owners, management for MCA? Seagram may buy it, but execs could quit anyway.

Despite early assertions to the contrary, it seems Matsushita Electric Industrial Co.-owned MCA Inc. is now in play, with Seagram Co. emerging as its most likely suitor.

The change in Matsushita's plans for MCA - which owns Universal Pictures, Universal Studios Hollywood and MCA Records - seemed most apparent at the MCA press office, which had early maintained that the Japanese electronics giant was still mulling what to do with its Hollywood properties.

But, as rumors of talks between Matsushita and interested buyers began to appear in print last week, an MCA spokeswoman limited her response to a simple "no comment."

As of press time, the most talked-about possible deal involved a purchase of MCA by Seagram, the Canadian-owned beverage company. Under this scenario, entertainment industry sources said, Seagram would sell its considerable stake in DuPont Co. back to DuPont for about $10 billion. Seagram would then use that cash to buy MCA or a large interest in that group, with Matsushita retaining a minority holding.

Others said to be potential suitors for MCA include Dutch entertainment company PolyGram NV and U.S. cable giant Tele-Communications Inc.

Management matters

Industry insiders noted the prolonged battles between MCA's Japanese ownership and its U.S. top executives - Chairman Lew Wasserman and President Sidney J. Sheinberg - have helped spur Matsushita's search for a buyer.

Thwarted in their efforts to expand the company through acquisition and to have greater control over company finances, Wasserman and Sheinberg are likely to leave MCA when their contracts expire at the end of the year, said Derek Baine, associate analyst with Paul Kagan Associates in Carmel, Calif. And, if MCA's top management goes, the company's value will drop, Baine said.

Late last week, there was speculation that Wasserman and Sheinberg would leave even if MCA changes hands. Sheinberg was quoted in an L.A. Times story as being angry that MCA executives are being kept in the dark about Matsushita's efforts to sell MCA.

Add to this mix the newly formed DreamWorks SKG, which boasts the talents of director Steven Spielberg and music mogul David Geffen - whose relationships with MCA have been quite profitable for the Universal City-based entertainment company.

If Sheinberg and Wasserman leave MCA, Baine said, it is unlikely that Dream-Works would form a distribution alliance with MCA. And that would put the company in direct competition with MCA.

'Good time to sell'

"Matsushita risks losing value at the studio if they don't have their top management team there," Baine said. "Now might be a good time to sell it."

Mike Adler, an entertainment attorney with the Century City-based law firm of Mitchell, Silberberg & Knupp, noted that Matsushita, with annual revenues of $64 billion, made its fortunes in selling electronics hardware, not the Hollywood-produced software of movies and music.

In taking a cautious approach to entertainment, the Japanese vetoed Wasserman's hopes of buying NBC, said Adler, who questioned whether Matsushita is in the entertainment business "for the long haul."

Now, Adler said, Matsushita could probably sell the studio and make a bit of money for its trouble. After all, he notes, with Paramount Pictures recently selling to Viacom Inc. for $10 billion, entertainment companies are still highly sought properties.

Dropping dollar

Working against the sale is the plunging value of the dollar against the yen, meaning Matsushita would have to sell MCA for substantially more than the $6.6 billion it paid for it in 1990 to recoup its investment.

However, Baine said, Seagram CEO Edgar M. Bronfman Jr. reportedly has wanted to get into the entertainment business for some time, and Seagram recently purchased a $2 billion - about 15 percent - stake in Time Warner Inc. Industry watchers suggest Seagram, which would prefer to control an entertainment company than be a minority stockholder, would divest itself of its Time Warner stake if it bought MCA.

Polygram, owned primarily by Dutch electronics giant Philips Electronics NV, would also be a good fit with MCA, Baine said. Polygram already owns record labels Motown and A&M, and has been buying stakes in several smaller production companies around Hollywood.

Buying MCA, Baine said, would give Polygram the Hollywood entree it has been seeking.

But one who is more sanguine about the MCA sale is Peter Dekom, an entertainment attorney with the law firm of Bloom, Dekom, Hergott and Cook in Beverly Hills. He said Japanese companies rarely play out their business deals in the press, and the fact that this one has gotten so much media attention could signal that there is more going on than meets the eye.

"I'm very suspicious about the whole thing," Dekom said. "Something is wrong here."

However, Dekom was quick to add, "but I don't know what it is."