Davis May Sell His Stake in Fox : Murdoch Negotiating to Acquire Oilman’s 50% Interest

Oilman Marvin Davis is negotiating to sell his 50% of 20th Century Fox Film Corp. to Rupert Murdoch, the ex-Australian press magnate who bought into loss-plagued Fox as co-owner less than six months ago. Sources familiar with the talks confirmed that they are under way.

If a sale does go through, Murdoch will strengthen his U.S. communications and entertainment empire by taking undisputed control of a major Hollywood movie studio.

Murdoch recently won U.S. citizenship to qualify for ownership of a major string of television stations that he bought from Metromedia for $1.5 billion. Federal law will likely force Murdoch to dispose of certain major newspaper holdings to obtain a broadcasting license.

Neither the Murdoch nor the Davis camp was commenting Thursday on a report in the Wall Street Journal of the Fox sale discussions, which put a potential price tag on the deal at $300 million or more. Murdoch bought his 50% Fox interest last March for $162.5 million, an amount that he subsequently reported borrowing from banks. Additionally, he advanced $88 million to Fox’s parent company, TCF Holdings.

No one in authority was willing to say Thursday how close Murdoch and Davis might be to a deal. Davis has a track record of stormy business negotiations and at one point in 1981 he backed out of his Fox purchase before going through with it.

It was anticipated that Murdoch might arrive back home in New York on Thursday night from a trip to Europe, spokesman Howard Rubenstein said in New York, adding, “Therefore, we have no comment.

Davis was reported to be in Denver, where he maintains one of his homes and the headquarters of his extensive oil drilling operations.

From the time of Murdoch’s announced purchase of a half-interest in Fox, Wall Street analysts have predicted that the Murdoch-Davis marriage couldn’t last. Each has a business history of running a one-man show and no one could picture either as a passive investor sharing joint ownership.

“It (the report of sale negotiations) doesn’t surprise me,” said Dennis Forst, vice president of research for Seidler Amdec Securities here.

Neither customarily operates in the way that they have been paired at Fox and both are strong-willed personalities, he noted.

The key figure in the Murdoch-Davis picture now, as he has been all along, is Barry Diller, who is winding up his first year of hard-nosed revisions at the studio since Davis gave him carte blanche as Fox’s $3-million-a-year chief executive last October. Diller had been chairman of Paramount Pictures.

Diller’s stock was so high with Murdoch that the press magnate selected him to oversee planning for Murdoch’s acquisition of six Metromedia television stations, including KTTV Channel 11 in Los Angeles, since June.

Since Davis himself backed out as a Metromedia participant with Murdoch, Hollywood has been buzzing with reports of Davis’ dissatisfaction at the diversion of some of Diller’s time and energy from Fox to the Metromedia operation.

According to the Wall Street Journal report of sale negotiations, which did not cite sources of the information, Davis did agree several weeks ago to let Diller work on the TV operation until the deal is closed. According to other recent reports, not confirmed, Davis was initiating a renegotiation of Diller’s contract because of the Fox-Metromedia dichotomy.

Diller said Thursday that reports of a renegotiation were not correct. He said there was “nothing to say” about the reported sale negotiations.

His contract from Davis last October, which did not reach public eye until last March, showed that Diller obtained unusual power to operate the company without interference from Davis.

In the eyes of some industry veterans, the wording of the pact showed that Davis virtually became a passive investor as the price of getting Diller to try to turn around Fox’s fallen fortunes in theatrical films and network television programming.

Although Davis largely recouped his 1981 investment in Fox by selling off assets and taking cash out of operations during his ownership, the studio itself drifted into a cash squeeze and chronic losses.

After Diller was hired, Fox took major write-offs in reporting an $85-million net loss for the fiscal year ended Aug. 25, 1984. The current year’s results have not been reported. However, Fox said last July that it expected to end fiscal 1985 about the same as the previous year.

Although the company reported that its accumulated net loss already had reached $80 million in the first three quarters, the success of its recent films, “Cocoon” and “Prizzi’s Honor,” was expected to help achieve break-even or a slight profit in the final quarter. Diller said in July that he was looking forward to better times in the new fiscal year.