The Canadian drinks and entertainment group plans to float its Tropicana fruit juice subsidiary to help pay for the acquisition. It hopes to get between $3.4bn to $4bn from that sale.

Ewan McGregor in box-office hit Trainspotting

It is also considering selling off PolyGram's film division which backed hits like Four Weddings And A Funeral and Trainspotting and has been a major factor in the rebirth of the British film industry.

London-based PolyGram's earnings rose 17% last year, helped by the smash debut of the brotherly Hanson trio.

It also has names like Pavarotti, U2, Metallica, Bob Marley, Elton John and Sheryl Crow on its books.

It was the success of music sales which helped the company to offset losses made from films.

But this year's first-quarter earnings plunged 88% as music sales dropped 6%.

Dutch electronics group Philips which owns 75% of Polygram decided it was time to sell and found a willing bidder in Seagram.

Seagram founded its empire on making wines and spirits including famous brands such as Absolut Vodka and Captain Morgan rum.

Bob Marley: top name in PolyGram's Island Records

Its major entry into the entertainment business came in 1995 when it bought MCA, now known as Universal Studios, for $5.7bn.

As well as owning the Universal Studios theme park, it also produces and distributes films, runs the MCA record label and several other music companies.

Seagram said the PolyGram deal would help to shave costs by about $300m each year.

Edgar Bronfman, chief executive of Seagram said: "These announcements herald an important transformation of Seagram.

"We will manage two highly focused businesses of global scope and scale - entertainment and spirits and wine.

"With the acquisition of PolyGram we become a global entertainment leader, including the world's largest music company, with a truly impressive roster of musical talent."

Bronfman himself is not without musical talent. He even co-wrote pop star Celine Dion's current single "To Love You More."

The PolyGram deal comes after Seagram reportedly failed to strike a deal to buy Britain's EMI group, whose artists include the Rolling Stones and the Spice Girls.

Seagram shares, which had been up about 5% all day in anticipation of a PolyGram deal, jumped $3.75, or 9%, to $44.75 on the New York Stock Exchange after the announcement.

PolyGram's US shares rose $1.75 or 3%, to $56.875 on the NYSE, below Seagram's planned purchase price of $59 per share.

The Canadian drinks and entertainment group plans to float its Tropicana fruit juice subsidiary to help pay for the acquisition. It hopes to get between $3.4bn to $4bn from that sale.

Ewan McGregor in box-office hit Trainspotting

It is also considering selling off PolyGram's film division which backed hits like Four Weddings And A Funeral and Trainspotting and has been a major factor in the rebirth of the British film industry.

London-based PolyGram's earnings rose 17% last year, helped by the smash debut of the brotherly Hanson trio.

It also has names like Pavarotti, U2, Metallica, Bob Marley, Elton John and Sheryl Crow on its books.

It was the success of music sales which helped the company to offset losses made from films.

But this year's first-quarter earnings plunged 88% as music sales dropped 6%.

Dutch electronics group Philips which owns 75% of Polygram decided it was time to sell and found a willing bidder in Seagram.

Seagram founded its empire on making wines and spirits including famous brands such as Absolut Vodka and Captain Morgan rum.

Bob Marley: top name in PolyGram's Island Records

Its major entry into the entertainment business came in 1995 when it bought MCA, now known as Universal Studios, for $5.7bn.

As well as owning the Universal Studios theme park, it also produces and distributes films, runs the MCA record label and several other music companies.

Seagram said the PolyGram deal would help to shave costs by about $300m each year.

Edgar Bronfman, chief executive of Seagram said: "These announcements herald an important transformation of Seagram.

"We will manage two highly focused businesses of global scope and scale - entertainment and spirits and wine.

"With the acquisition of PolyGram we become a global entertainment leader, including the world's largest music company, with a truly impressive roster of musical talent."

Bronfman himself is not without musical talent. He even co-wrote pop star Celine Dion's current single "To Love You More."

The PolyGram deal comes after Seagram reportedly failed to strike a deal to buy Britain's EMI group, whose artists include the Rolling Stones and the Spice Girls.

Seagram shares, which had been up about 5% all day in anticipation of a PolyGram deal, jumped $3.75, or 9%, to $44.75 on the New York Stock Exchange after the announcement.

PolyGram's US shares rose $1.75 or 3%, to $56.875 on the NYSE, below Seagram's planned purchase price of $59 per share.