Sources Say MCA to Announce Deal for Geffen Records

MCA Inc. is expected to announce as early as today a deal to acquire music mogul David Geffen’s entertainment company, individuals with knowledge of the proposed transaction said Tuesday.

Geffen has backed away from a $750-million deal to sell his record company to British media conglomerate Thorn EMI.

Geffen also had continued 11th-hour talks about renewing his decade-long distribution arrangement with Time Warner Inc.’s record subsidiary. One Time Warner source said that company had offered to pay Geffen a substantial amount of cash for an option to buy his firm in four years.

One source said Geffen had announced the MCA deal to his staff late Tuesday, and several sources close to Geffen and MCA claimed the deal was completed.

Two individuals familiar with the deal said they believed that Geffen would receive MCA stock in return for his entertainment company.

If Geffen received MCA stock equal to the reported $750-million price offered by Thorn EMI, he would acquire about 13.3 million MCA shares and would control about 15% of the company, based on MCA’s closing price of $56.375 a share on Tuesday. Such a deal would apparently make him MCA’s largest stockholder. MCA Chairman Lew R. Wasserman currently controls about 11.3 million shares.

Geffen, 47, has been under pressure to reach an accord on the future of his company, whose artists include Guns N’ Roses, Cher and Whitesnake. His distribution pact with Time Warner expires at the end of the year, and he apparently wants to make new arrangements before the clamor for record companies cools and prices decline. Nevertheless, he has shrewdly orchestrated his talks with suitors of his company, which had estimated sales last year of $200 million.

“David Geffen is the preeminent entrepreneur,� Bob Buziak, president of RCA Records, recently told The Times. “He’s extremely successful on every front.�

A Geffen defection would be a major blow to Time Warner’s music division, although it appeared he would continue to distribute his records through Time Warner through the end of the year.

The Geffen Records acquisition, however, would greatly boost MCA’s roster of rock artists. MCA, which owns both MCA Records and Motown Records, is one of six major international music distributors, but commands a much smaller market share than either Time Warner or Sony Corp.’s CBS Records unit.

The prospective deal with MCA appeared to include Geffen’s film operation, which currently distributes movies through Warner Bros. Several sources speculated that Geffen Records would operate as an autonomous unit at MCA and that Al Teller, chairman of MCA’s Music Entertainment Group, would remain in place.

Only days ago, in an interview with The Times, Teller denied that his company was negotiating any major acquisition.

Word of Geffen’s talks with MCA surfaced Tuesday, when both MCA Records and Geffen spokesmen promised a late afternoon announcement but later pulled back. MCA President Sidney J. Sheinberg didn’t return a call. Neither Teller nor Geffen could be reached.

An individual familiar with Geffen’s earlier negotiations with Thorn EMI, which owns Capitol EMI music, said that deal unraveled about a week ago.

“Geffen started feeling that he wouldn’t be getting full operating control, and he started saying that he missed (Time Warner Co-Chairman) Steve Ross, that he didn’t feel he would be treated the way he was with Ross,� the individual said.

The Thorn EMI deal was reported to include both cash and Thorn EMI stock.