Davis Sells Murdoch His 20th Century Fox Stake for $325 Million

Six months after becoming co-owner of 20th Century Fox Film Corp., media baron Rupert Murdoch agreed Monday to pay $325 million for the 50% interest owned by his partner, Marvin Davis.

In addition, the deal calls for Fox and a Davis-controlled investor group to swap their stakes in certain jointly owned major assets.

Under this swap, Murdoch’s Fox would transfer to Davis’ Denver-based real estate partnership group the movie studio’s remaining interests in two resorts, Pebble Beach, a golf course near Monterey, and Aspen, a Colorado skiing resort, as well as the land under a high-rise office building being constructed on Fox’s 60-acre lot in West Los Angeles.

The Davis group in turn would transfer its own half-interest in the rest of the Fox studio land to Murdoch’s Fox. Neither got additional value, a Murdoch representative said.

“Fox and the Davis (group) just swapped interests in different pieces of the (Fox-Davis joint ownership),” Arthur Siskind, a New York attorney for Murdoch, said in a telephone interview. “Neither, in essence, received more value than they already owned. The partnership assets and liabilities were divided in a manner in which the partners received equal value.”

Murdoch’s initial purchase last March of a 50% Fox stake from Davis for $162.5 million, plus an $88-million advance, gave the loss-ridden studio a huge cash infusion. It also gave needed help to new Chairman Barry Diller’s program of rebuilding and expanding film production.

String of Flops

The Davis era at Fox, which began in June, 1981, was hurt by a string of box-office flops. The studio reported an $89-million net loss in the fiscal year ended August, 1984, and the firm’s most recent financial statement showed an $80-million net loss for the first nine months of fiscal 1985.

But Davis is believed to have made a good profit in selling out to Murdoch. A source close to Davis said unofficially Monday that it is his understanding that Davis “came away about $500 million ahead of where he started” before Murdoch entered the picture.

The source would not characterize the $500 million as profit, however.

Through a spokesman, Davis said Monday:

“Our Fox investment has been an extremely successful one. While it was not our intention to sell the balance of our interest at this time, we concluded that it made good business sense to accept Rupert Murdoch’s offer.

“We will now concentrate on the development of our other activities--including the former Fox properties. And we will take advantage of our extremely strong and flexible position to actively explore other business opportunities.

“We have enjoyed our association with Fox and its many wonderful and talented people. We wish Mr. Murdoch, Mr. Diller and all of Fox’s employees great success in the future.”

A source close to Murdoch said the first talks leading to the buy-out of Davis began last July shortly after Davis backed out of a previously reported participation in Murdoch’s $1.5-billion purchase of six Metromedia television stations.

Separate Signings

The source said that there were sporadic conversations but that “serious” negotiations did not occur until “the last couple of weeks.” Contracts were signed by Murdoch and Davis in separate locations over the weekend and the papers brought together Monday morning, the source said.

Murdoch, who owns newspapers in Australia and Britain as well as the New York Post and Chicago Sun-Times, has made no secret of his desire to own a major Hollywood movie studio. At one point, he was reportedly interested in buying the Warner Bros. studio.

As previously reported, Murdoch has already tabbed Diller for a major role in planning for the Metromedia stations being acquired by Murdoch, and Diller is also expected to continue at the Fox helm as well.

Diller said in a telephone interview Monday that Fox will be restructured to some extent to coordinate the studio’s functions that will relate to the television stations. Although Fox will not absorb the stations, he said, “we will have an operating structure that will relate those different businesses, as it should.”

He said it is “a little premature” to give details at this time but said Fox would be telling more about its plans in the next several weeks.

As previously reported, Diller’s division of time between Fox and the Metromedia deal reportedly developed into a sore point between Davis and Murdoch after Davis withdrew from the Metromedia purchase.

Monday’s joint announcement by Davis and Murdoch said the Fox Plaza Joint Venture that is constructing the high-rise office building near Century City will continue to operate in the same manner with the Davis real estate partnership and Fox as joint venturers.

The parties said all transactions are expected to close this fall, “as soon as the necessary approvals and consents have been obtained and after any required waiting period under the Hart-Scott-Rodino (antitrust) Act has passed.”