The Unmaking of a Dynasty
Dreaming of a global media company and driven by blind ambition, Edgar Bronfman Jr. shed the crown jewels of his grandfather's empire and nearly destroyed the family fortune.
From the Print Edition:
Edgar Bronfman Jr., Mar/Apr 03
Edgar Bronfman Jr. is his usual cool, controlled self as he artfully bobs and weaves through a handful of tough questions from CNBC anchor Maria Bartiromo. The tall, handsome scion of a famous family, with his familiar reddish-brown designer stubble, impeccable Armani tailoring and easygoing manner, has little new or revealing to say. But his appearance in late October on the high-profile show with the interviewer known during the stock-market bubble years as the Money Honey speaks volumes. Bronfman's disastrous wager on the ambitious dreams of a French empire builder has cost his family billions and left his own reputation in tatters.
Still fabulously wealthy by the standards of ordinary mortals, he could have simply slunk off home to his elegant townhouse on Manhattan's Upper East Side, returned to writing the romantic pop songs he used to pen in his spare time, and stayed out of the spotlight he never much liked anyway. Instead, there he is on prime-time cable, talking about feeling betrayed and making it abundantly clear there and in a handful of other carefully selected interviews that he's not about to leave the stage without doing everything possible to salvage what he can of both the family fortune and his reputation.
"My focus is entirely on trying to help all of the stakeholders, management and shareholders, to recapture the value that has been squandered and formulate a future that is exciting," Bronfman declares in another of those interviews. The future he's talking about in his typical bizspeak is not necessarily his own but that of Vivendi Universal, the unwieldy transatlantic conglomerate forged two years ago through the merger of a French media and utilities company with the Hollywood entertainment businesses he had assembled at Seagram, the global liquor empire founded by his legendary grandfather, Samuel Bronfman. When he speaks of squandered value, he's talking from painful experience. Of all the unwitting victims of the collapse of the dot-com bubble and the shattering of the myths that fueled the Internet boom, few have lost more -- financially, emotionally, and in terms of stature and prestige -- than the Bronfmans. On Edgar Jr.'s urging, this proud family traded in an heirloom that was the source of one of the world's great fortunes in exchange for a piece of a New Economy dream, and then watched in helpless horror as it all went terribly wrong.
The roots of the disaster had their origins in the very foundations of the dynasty and the forbidding legacy left behind by Sam Bronfman, the clan's mercurial founder. But the actual beginning of the end can be traced to a fairly innocuous breakfast meeting that Edgar Jr. decided to squeeze into a Paris vacation one cool, overcast October morning in 1999. The meeting he arranged was with Jean-Marie Messier, a compact bundle of energy, ambition and ego, who was then in the midst of transforming a staid French water and sewage utility called Vivendi into a media and communications colossus. It didn't take long for Edgar Jr. to realize that he was talking to someone who shared his grand vision of an Internet-driven future dominated by a few smart global media companies. He, too, was in the business of change, having torn Seagram from its long-established roots in spirits and wine and plunged it headlong into the much riskier but far sexier realm of music, movies and theme parks. But it was the Internet and its endless possibilities that really made his eyes light up. The casual 30-minute get-together over coffee and croissants at Vivendi's splendid new headquarters on Avenue de Friedland, near the Arc de Triomphe, stretched into a three-hour conversation. Eight months later, the two new soul mates would jubilantly announce a stunning marriage mingling two vastly different cultures and several strong personalities to create the world's second-biggest media and entertainment company. In less than two years, it would all unravel, leaving a trail of bitterness and broken dreams.
Today, after nearly being crushed to death under a mountain of debt accumulated by Messier in his hell-bent drive for size and glory, Vivendi Universal is on life support, its survival in the hands of a rescue team parachuted in by the worried French business establishment, its long-term prognosis still doubtful. The architect of the debacle was ousted last July at the instigation of the Bronfmans, who feared their rapidly declining investment would soon be utterly worthless. "He just kept buying everything in sight, like a kid in a candy store," says Edgar M. Bronfman, Seagram's former chairman and Edgar Jr.'s father. "And he didn't care what the price was." From the time the acquisition of Seagram was completed in December 2000 and its prized liquor assets sold off, until Messier's departure a little more than 18 months later, the company added an astonishing $1 billion worth of debt a month to pay for a dizzying media and telecom spending spree that left the Bronfmans and other investors shaking their heads in disbelief. The inevitable result was a liquidity crisis of monumental proportions.
Yet, at first, the French old-boys network that dominated the company's board rallied around their beleaguered countryman, even as investors fled in droves and sent the company's stock price spinning to record lows. In France, corporate chiefs have power that a Jack Welch could only dream about. And when they're as well connected as Messier was, they are practically a law unto themselves, as the Bronfmans discovered to their dismay. The French elite thought that in Messier and his Napoleonic ambitions, they finally had someone who could stand toe-to-toe with the American titans of popular culture and carry the French flag to their home turf, one of the goals Messier rarely mentioned outside of France. But the directors were finally persuaded by nervous bankers and by an unusual round of shuttle diplomacy conducted by Edgar Jr. himself that Messier had to go before he drove one of France's oldest and most important companies right off a cliff.
By the time a determined Edgar Jr. presided as vice chairman over the board meeting that sealed Messier's fate, the value of the Bronfmans' holding had plunged more than 70 percent -- chopping their worth by more than $2 billion in the previous six months alone. The family has sold a sizable chunk of the Vivendi Universal stock received in exchange for Seagram, but it still ranks as the largest shareholder in the widely held company with 4.9 percent ownership. Today, although the share price has improved a bit as the new management wrestles with asset sales to bring down the killer debt, the Bronfman investment is worth less than $800 million and the family's total paper losses exceed $3 billion. "This is not play money," says an insider. "It was real, and there was a real betrayal." It's obvious that this is what hurts most of all. "Not to pooh-pooh the money, but that's not the real disaster," Edgar Sr. insists. "The real disaster is bad judgment. [We] took something my father had built and my son had converted into something which was really dynamic, and put it with these guys to get the kind of size we needed. And suddenly it blew up in our faces."
The Bronfmans' downfall is more modern morality play than Shakespearean tragedy, with Messier perfectly cast in the role of the tempting devil. The bubble years produced many such characters, financial alchemists promising to spin gold out of dot-com or fiber-optic versions of base metal; but few were as boyishly charming, brilliant or persuasive as the one-time wunderkind of French investment banking. "It's an unfortunate story," says Edgar Sr., putting it mildly, as he thinks back to the person he thought was the perfect choice to carry the family's fortunes into the new millennium. "He's a good salesman and I thought he was going to do a great job. He made such an impression. But he turned out to be less than we thought."
The other main actors in the drama all played their scripted parts to the bitter end, unable to alter their seemingly preordained destiny. Edgar Jr., 47, had been handed the overwhelming responsibility of safeguarding the family's immense fortune for future generations and was determined to prove he was more than up to the task. His doting 73-year-old father was equally determined never to look over his son's shoulder or second-guess his decisions, the way his own father had. Finally, there was his uncle, Charles Bronfman, 71, Seagram's former co-chairman, the cautious, conservative member of the family who is best known for his philanthropic work in Israel and for having once owned the Montreal Expos baseball team when it actually drew crowds. Charles had vowed never to provoke a family feud over business, and stayed true to his word, even as his worst nightmares came true. And hovering over the stage, haunting the family still, is the specter of the man known as Mr. Sam, the larger-than-life Montreal liquor baron with the steely will and the towering temper, who unwittingly laid the groundwork for the disaster that would strike his descendants three decades after his death. All it took was the right catalyst.
Edgar Sr. still vividly recalls how tough his overbearing father made his life at Seagram, as the old man clung to power in his final years. In the end, he says, Sam "ruled by veto, not by imagination" -- for example, fighting new liquor marketing methods that he didn't understand. "I remember telling my father: ëWhy don't you advertise to your own contemporaries, because they're mostly dead.' You have to realize it's a young person's game. You can do a lot of things for a long time, but marketing is something that's a little different." So when his own son's turn came, Edgar Sr. gave him free rein to bring in fresh ideas and make his own mistakes. He has always professed to be satisfied with the results, particularly with his son's hugely controversial move into Hollywood -- at least until the Vivendi fiasco. And even then, he doesn't regret the decision to sell Seagram -- only the outcome. "We misjudged a human being and we're paying for it. It's one of those things where the buck stops here. There's no place else. We can't look at somebody else and say, ëIt was your fault.'"
You must be logged in to post a comment.