Davis, Murdoch to Buy 7 Metromedia Stations

Marvin Davis and Rupert Murdoch, co-owners of 20th Century Fox Film Corp., said Monday that they have agreed to buy Metromedia Inc.’s seven television stations, including KTTV-Channel 11 in Los Angeles, in a transaction worth about $2 billion.

The buyers apparently need to raise only $200 million in new capital, however, because of the structure of the deal. Davis and Murdoch said they will sell Metromedia’s Boston station, WCVB-TV, for about $450 million in cash to Hearst Corp., and they said they will assume about $1.35 billion in debt issued by Metromedia Broadcasting last December.

Executives close to Murdoch, an Australian newspaper publisher, and Davis, a Denver oilman, declined Monday to say how the two men intend to raise the $200 million needed to complete the deal. One source insisted, however, that the two men do not intend to sell off any of the remaining six stations.

As reported, Murdoch has already told the Federal Communications Commission that he will seek U.S. citizenship to clear the way for his investment. Federal law severely limits a foreigner’s ability to control or own stock in U.S. broadcast properties.

FCC rules also prohibit common ownership of daily newspapers and television stations in the same market. A Murdoch-controlled company publishes newspapers in Chicago and New York, where two of the Metromedia stations are located.

Although Murdoch could seek a waiver to the cross-ownership rule, “he will not,” according to Howard J. Rubenstein, a spokesman for the publisher. However, Murdoch “won’t say he’s selling the papers,” Rubenstein said.

Rubenstein said Murdoch’s 46%-owned company, News Corp. Ltd., had a cash flow of about $100 million in 1983 and slightly more in 1984.

In 1984, Murdoch reaped profits of about $77 million from two investments after he posed an unwelcome takeover threat to Warner Communications and St. Regis Corp. Murdoch made a profit of about $40 million when Warner repurchased his 7% stake, and he made about $37 million by selling his 5.6% stake in St. Regis when that company sought a friendly merger with Champion International.

Major Investments

News Corp.’s stake in Reuters, the international news agency, has appreciated by more than $40 million to about $165 million since the agency went public, Rubenstein said.

Murdoch has also invested hefty sums recently. Last November, he agreed to buy 12 trade magazines from Ziff-Davis Publishing for $350 million, and last month he paid $162 million for half of Fox, advancing the studio an additional $88 million.

Analysts said Murdoch would be hard-pressed to find a buyer for the New York Post, a perennial money loser, and predicted that Murdoch might also have difficulty recouping his $90-million investment in the Chicago Sun-Times, which a Murdoch-controlled company purchased last year.

Although one source close to Murdoch said the publisher will seek a buyer for the Village Voice, a New York weekly, for about $55 million, sale of that publication would not be required to meet FCC rules, according to John Morton, a newspaper analyst with Lynch, Jones & Ryan, a brokerage firm.

Instead of operating the TV group as a Fox subsidiary, Murdoch and Davis plan to form a new company, according to Rubenstein. But analysts and industry executives were quick to speculate that the acquisition of the TV properties might bode well for Fox, which produces television programming.

Fox Chairman and Chief Executive Barry Diller praised the investment in a brief telephone interview Monday, noting that the six stations could constitute a fourth major TV network, “opening up new markets” for Fox.

But the studio chief insisted that “the station group itself is only going to have one standard: What is the best program? What is the best show?”

A top television executive at a rival studio concurred, although he asked for anonymity. “It’s always nice to own production, distribution and exhibition,” he said, but he predicted that Murdoch and Davis won’t jeopardize their investment in the TV stations simply to provide an outlet for Fox programming unless the programming merits it. “You don’t want to buy bad programming because someone related to you made that show,” the executive said.

Diller noted that Metromedia’s stations might be better positioned for growth than those owned and operated by CBS, NBC or ABC because of its Sun Belt holdings. In addition to stations in New York, Chicago and Los Angeles, Metromedia’s licenses include WTTG in Washington, KRLD-TV in Dallas-Fort Worth and KRIV-TV in Houston.

Diller said that Richard C. Block, executive vice president of Metromedia Television, and top managers of the six stations will continue in their posts.