Talks With Polygram Confirmed : Co-Founders of A&M; Records Considering Sale of Company

A&M; Records founders Herb Alpert and Jerry Moss confirmed in a memorandum distributed to employees Friday that they are “having conversations with Polygram regarding future business opportunities.”

The one-page memo did not disclose the terms under discussion for the company, which was founded by the pair in 1962 in trumpet player Alpert’s Fairfax district garage. However, N. V. Philip’s Polygram unit has reportedly offered about $500 million for closely held A&M; in a deal said not to include the company’s real estate or music publishing interests.

“Should these talks materialize into some sort of business transaction, you must know that we would only consider such a move if it strengthened our position in the industry,” the A&M; executives, both 54, wrote in their memo. “Along with our artists and producers, A&M;’s management and staff continue to remain our biggest asset and our highest priority for now and for the future.”

A&M; officials would not comment on the memorandum, and Polygram officials could not be reached Friday. However, a spokeswoman for A&M; said that, although there was “a lot of discussion” about the memo among A&M;’s staff, it was “business as usual” at the company.

An acquisition of A&M; would be Polygram’s second purchase of a large independent record company this summer and would continue a trend of consolidation in the recording industry.

Polygram, which ranks third in record sales behind Time Warner’s labels and Sony Corp.’s CBS Records, announced last month that it had bought Island Records for a reported $331 million.

Industry ‘Pretty Consolidated’

Polygram already distributes A&M;’s records in Europe. RCA Records is the U.S. distributor of A&M; Records, which has only a 2% market share and has long been rumored to be up for sale.

If Polygram completes the purchase, analysts believe that it would help position the company for a run at CBS Records’ second-place standing in the record industry. A purchase would leave only Geffen and Virgin records as major, independently owned labels.

“The industry was pretty consolidated even before this rumor surfaced,” said James C. Goss, an analyst for the Duff & Phelps investment house in Chicago. “You already had a near oligopoly.”

However, Goss said he didn’t believe that the proposed deal would result in increased record prices or reduce opportunities for new recording artists.

Finding hot new talent has lately been problematic for A&M.; Although the Hollywood-based company had been one of the industry’s most consistently successful labels for more than 25 years, it has performed poorly this year.

A&M; has annual sales of between $220 million and $300 million, according to analysts’ estimates.

A&M; currently has just one album in the top 100: “Surprise Attack” by the hard rock group Tora Tora Tora. However, the company has high hopes for a forthcoming release by Janet Jackson, whose last album, “Control,” sold nearly 5 million copies in the United States.

Many in the industry expected that Alpert and Moss might wait until A&M; climbed out of its current slump before selling the company. And some sources close to the talks said Friday that Alpert and Moss may consider selling only a minority stake in their company.

Others say that if Jackson’s album is released soon and sells well, Alpert and Moss may wait for a better offer.

Walt Disney Co. reportedly has expressed interest in A&M; as a music operation to compete with entertainment industry rivals MCA Inc. and Time Warner. But analysts contacted Friday said the Polygram bid was too far along for A&M; to be considering other offers.