Oil and film mogul Marvin Davis and Australian press tycoon Rupert Murdoch joined hands Wednesday, with Murdoch buying a 50% stake in Davis' money-losing 20th Century Fox Film Corp. in a $250-million deal.
A Murdoch statement said he is paying $162 million cash for the half interest in TCF Holdings Inc., the Davis-controlled company that owns the Los Angeles-based movie studio, and will also "advance" another $88 million to TCF. The parties said they expect to close the transaction in about a month, but Murdoch's exact role at the studio remained unclear.
Several months ago Davis reportedly paid $116 million to buy out oil trader Marc Rich, who was his partner in buying the studio in mid-1981. Rich became a fugitive from U.S. tax prosecution more than a year ago, and Davis arranged to buy his partner's half.
While the deal will give Fox a welcome cash infusion, the studio had announced only nine days ago that it had put together bank and other refinancing that resolved its movie funding problems and other needs. Fox has suffered in recent years from a lack of box office hits, which has severely hurt its financial results.
Fox lost $85 million in its fiscal year ended Aug. 25, 1984, and another $12.4 million in the first fiscal quarter ended Nov. 24.
It has been known for some time that Murdoch has wanted to own an interest in a Hollywood movie studio, and entertainment industry executives and analysts wondered how well Murdoch and Davis will get along as co-owners of Fox.
Both are known as strong-willed individuals who typically prefer to run their own operations. It is believed that this will be the first time Davis and Murdoch have been together in a business deal.
In Wednesday's joint announcement, Murdoch voiced strong support for Barry Diller, the Fox chairman hired last fall by Davis and given what appears to be a free hand in rebuilding the studio's theatrical film production program.
However, some observers immediately speculated that Murdoch, whose international press empire includes the New York Post, the Chicago Sun-Times, the Boston Herald, New York magazine, the Village Voice and the London Times, will not be content for long to keep a hands-off attitude concerning the studio.
Lee Isgur, an entertainment industry analyst at the New York investment firm of Paine Webber, Mitchell Hutchins Inc., predicted that the Australian may obtain control of Fox within 12 months.
While some entertainment industry people agreed, others said they thought it more likely that Murdoch wants Diller to build up the company, which would then permit him to sell off some of its stock to the public again.
Sources close to the situation said they knew of no middlemen, or even investment bankers, having a role in the deal. The widespread impression was that Davis and Murdoch, both accustomed to negotiating deals themselves, put the deal together personally.
Meanwhile, representatives of Murdoch and Davis declined Wednesday to go beyond their formal statement. Diller could not be reached for comment.
"I am extremely happy to have Rupert Murdoch and his company as my partner," Davis said in the statement. "Mr. Murdoch is a proven entrepreneur and I look forward to a long and fruitful association."
Murdoch added that he was "delighted" to be working with Davis, and that Fox is "positioning itself for significant growth" under Diller.
The announcement said Murdoch agreed to make the purchase through his privately owned News Corp. Ltd. The statement did not make clear the terms of the $88 million "advance" being made by Murdoch to TCF in addition to the $162 million cash payment.
The companies said TCF will plow back $132 million into Fox, the holding company's only significant asset. That amount will include $82 million from Murdoch and a $50-million capital contribution by Davis that was announced last week as part of a $170-million bank finance restructuring at the studio.
The remaining Murdoch money "will be used to fully retire TCF Holding's bank debt and to reduce shareholder debt," the announcement said.
Sources close to Fox told The Times that they know of no provisions in the deal that will enable Murdoch to increase his holdings above the 50% level. The sources also said the two will have equal voting rights in TCF. Rich's stake had no voting rights, thus giving Davis complete control of TCF.
Analyst Isgur said that because Murdoch last year made a brief attempt to take over Warner Communications Inc., parent of the Warner Bros. studio, and previously thought about buying Fox, he doubts that the publisher will be content as a passive investor.
Murdoch revealed in an interview with The Times in January, 1984, that he once eyed Fox as a possible acquisition. He said at that time that he had come to regret not having moved "aggressively" before the studio was sold in 1981 to Davis and Rich.
Bought Out Stock
At the time of the interview Murdoch was threatening to seek control of Warner Communications Inc. The battle ended last March when Warner, parent of Warner Bros., bought out his 7% stock interest for $180 million.
In addition to newspapers, Murdoch's holdings include Sky Channel in Europe, an operation that feeds television programming by satellite from England to cable systems on the continent. Murdoch also has an interest in a relatively small motion picture firm in Australia, according to people familiar with his holdings.
The Murdoch-Davis announcement said the deal will not affect Fox's recently reported revisions to its revolving credit agreement or to arrangements for a $120 million advance from CBS/Fox Co., a home video venture.
Isgur and other observers said it was difficult, if not impossible, to assess whether Murdoch got a bargain price for his entry into a major Hollywood studio. They noted that there is no certain way to know the current status of various Fox assets, including rights for use of its films as well as a number of non-film-related resorts and other properties.
The 50% sale of TCF appeared to end industry speculation that Davis had given Diller a portion of the company's stock to lure him to Fox after 10 successful years as chairman of Paramount Pictures Corp..
The Times has learned, however, that Diller does receive a form of participation, in addition to his salary, equivalent to 25% of any growth in the company's value from the date he was hired until several years after he leaves the company.
Times staff writer Kathryn Harris contributed to this story.