Dramatically expanding his media empire into the Hollywood film business, press magnate Rupert Murdoch has an agreement with Marvin Davis to purchase 50% of TCF Holdings Inc., the parent of 20th Century Fox, for $250,000,000.
Davis and Murdoch, in a joint statement yesterday that caught the industry by surprise, said that Murdoch’s News Corporation Ltd. was paying $162,000,000 for a half-interest in TCF and that “in addition, News will advance $88,000,000” to TCF.
The operative word, however, is the combined sum of the two figures — $250,000,000 — because the $88,000,000 is coming to TCP in the form of a loan that is in effect described as an “advance” for tax considerations.
Murdoch, Australian publisher of the New York Post, the Times of London and numerous other newspapers and media enterprises, called the deal “a significant investment for the News Corporation” and underscored “the outstanding leadership of Barry Diller” (Fox chairman and chief exec officer).
Unlike his personal forays into some of his newspaper domains, Murdoch is expected to leave production decisions and the daily running of the studio to Diller.
Immediate impact of the Murdoch purchase will be the pumping of a fresh $132,000,000, through TCF Holdings, into me Fox Film Corp.
The balance of $118,000,000,said the new partners, “will be used to fully retire TCP Holdings’ bank debt and to reduce shareholder (i.e. Davis) debt.”
The transaction will make equal the equity percentage and shareholder debt positions of the Davis and News interests. But unaffected, said the announcement, will be Fox’ recently announced plans for new bank financing (reportedly a $400,- 000,000 line of credit maturing in seven years), and a new homevid deal with CBS that would additionaliy bring Fox some $120,000,000.
Statement reported that Davis’ recently announced $50,000,000 capital contribution to Fox is included in the $132,000,000 figure going from TCP to Fox. But it remains unclear whether Davis will now actually make that contribution since TCP Holdings is a new ballgame with Murdoch as halfpartner.
Thus, Murdoch, who waged a battle for control of Warner Communications stock last year before being bought out as a hostile investor for a premium price ($172,600,- 000 for 5.500,000 shares) becomes the first newspaper baron since William Randolph Hearst to gain major entry into a Hollywood major.
Among Murdoch’s current domestic ownerships are the Village Voice, New York Magazine, the Chicago Sun-Times, the San Antonio Express News, the Boston Herald, and the aforementioned New York Post and The Times of London. He also owns broadcast outlets abroad. His News Corporation is an Aussie public company that is, in effect, controlled by Murdoch, who rules over its web of international interests.
Fox corporate spokesmen yesterday stressed that Murdoch’s arrival on the Fox scene is strictly “from a financial point of view” and that the action will generate considerable financial clout for a company whose operating earnings fell more than $110,000,000 in fiscal ’84.
Davis, with then-partner Mark Rich & Co. (a Swiss-based commodities firm) bought Fox in 1981 for $725,000,000, with the help of $550,000,000 in bank loans. (Rich, in tax troubles with the U.S. government, was bought out by Davis last year.) After buying Pox, Davis sold off outright the company’s Coca-Cola Bottling Co. in Minneapolis. Fox’ United TV, and its Hoyts theater chain in Australia.
Davis also sold 50% of Fox’ Studio Properties Co. and 50% of the company’s Pebble Beach and Aspen, Colo., interests to Aetna Life Insurance.
Later Aetna sold those interests back to a little-publicized entity known as M/K/D/GH (letters stand for Miller, Klutznkk/Davis/Grcy). Latter Davis group is not controlled by TCP Holdings and, in effect, owns 50% of the Fox lot.
Pocket To Pocket
During the years 1981-84, Davis’ Fox Film made pocket-to-pocket payments to Holdings totalling $538,595,000 as Davis’ equity as the sole Fox stockholder slid from $722,431,000 in ’81 to $66,665,- 000, according to the studio’s last 10K filing with the Securities & Exchange Commission (Daily Variety, Nov. 28, 1984).
With the infusion of Murdoch’s cash, the studio appears in a much stronger financial shape, with added equity and added working capital.
Diller yesterday pointed to “the definite correlation between entertainment and communications enterprises.” Davis stated that he looked forward “to a long and fruitful association.”
Transaction will take approximately one month to complete upon expiration of the waiting period required by the Hart-Scott-Rodino Antitrust Improvements Act.