It has been said that Bostonians dislike seeing their names in print as much as Los Angeles rcrresidents revel in it. True or not, the statement seems to fit Boston Ventures, a tight-lipped pair of low-profile, interlocking partnerships that manage more than $300 million in entertainment and media investments.
The names of Boston Ventures’ corporate and individual investors in various deals read like a casting call for Hollywood high rollers: oilman and former movie mogul Marvin Davis, television producers Norman Lear and Jerry Perenchio, former San Diego Chargers owner Gene Klein, Washington Redskins owner Jack Kent Cooke, Rupert Murdoch’s News America Publishing, Warner Communications, General Cinema Corp. and Los Angeles-based Pacific Theaters Corp.
When Metromedia’s top four executives decided in December, 1983, to buy the communications giant, they did not start off by calling a Wall Street investment bank--even though a managing director of Lehman Bros. Kuhn Loeb served on the board. Instead, they contacted Boston Ventures, then a 3-month-old venture capital partnership that had not yet done a deal.
No Premature Disclosure
The executives were impressed with the competence of the partnership’s senior director, former Bank of Boston Executive Vice President William F. Thompson, and thought that they needed his commercial banking contacts to raise money, recalls Stuart Subotnick, now executive vice president and a general partner of a reorganized Metromedia Co. But another plus turned out to be that, despite the importance of the deal to Boston Ventures’ survival, the partnership never sought to promote its role by disclosing details prematurely.
“Bill comes from a bank believing that discretion is important. There were no leaks about anything,” said Subotnick, unhappily remarking how rare this was. The partnership’s fees for the two months of negotiations leading to the $1.45-billion deal, he added, came to $4 million.
Some of the deals brought together since then by the partnership’s six professionals and lubricated with the investors’ cash have involved firms that are also well known in Southern California: the 1984 acquisition of Billboard Publications, the 1985 purchase of movie camera maker Panavision from Warner Communications and last year’s acquisition of Motown Records. And the pace of deals has been accelerating, with half a dozen publicly disclosed transactions in the past year alone. “They look around at a lot of deals,” an investment banker in Los Angeles said.
With the activity has gone a zeal for secrecy unusual even among bankers. Throughout deals involving companies with thousands of employees and wide use of public airwaves, Thompson and the other five directors of Boston Ventures have been very reluctant to grant interviews.
Boston Ventures spokeswoman Martha Crowninshield, who became the partnership’s sixth director and partner three years ago when she left her job as head of entertainment industry lending at the Bank of Boston, repeatedly refused to speak for this story, or even take phone calls. “Boston Ventures has a policy of not talking to the press. However, if you’d like to come by, our receptionist will tell you the same,” her secretary said.
A reporter attempted to visit the company’s directors anyway at their penthouse offices in downtown Boston but was not allowed into the elevator by a guard downstairs. “That’s what they provide security for,” the guard said.
The reticent behavior seems to be infectious. Executives at MCA Inc., Boston Ventures’ partner in the $61-million purchase of Motown Records, cited the partnership’s hostility to public mention in refusing to discuss the deal.
Such secrecy is not entirely unusual for private partnerships. Publicity may irritate participants in deals, especially the sellers of privately held companies. And news reports of huge profits may attract the unwanted attention of the Internal Revenue Service.
Finally, some partnerships shun the press out of a perception that their investors wish to stay out of view. This seems to be true in the case of Boston Ventures’ backers, who are reluctant to comment on their holdings in the company.
“We really are not active at all, and it’s a small investment that’s sitting there,” said Peter Farwell, a spokesman for General Cinema, a Chestnut Hill, Mass.-based movie theater owner and luxury retailer.
“We are an investor. We are very happy. No other comment,” Rupert Murdoch, chairman of News America Publishing, said in a statement. A Warner Communications spokesman made a similarly worded remark.
Investors have little reason to complain, as Boston Ventures has profited handsomely from the recent run-up in the price of media and entertainment properties. For example, the partnership joined company executives in 1984 to purchase Billboard Publications, owner of Billboard and Musician magazines, for $40 million. Within 2 1/2 years, the publisher was resold for $100 million.
Last March, Boston Ventures sold USA Cinemas to Columbia Pictures Entertainment for $165 million. Less than two years before, the partnership had bought what was the nation’s 10th-largest movie theater chain for a much lower but undisclosed price. The partnership probably made “two or three times” their original investment because most of the purchase price was paid with borrowed money, said Jeffrey B. Logsdon, a movie industry analyst with Crowell, Weedon & Co., a Los Angeles investment firm.
Thompson “did well in that,” agreed movie industry financier Herbert A. Allen, president of Allen & Co., a New York investment banking firm. “He has done well, so he has shown he’s a shrewd investor.”
What has made Boston Ventures successful, industry sources agree, is the sheer breadth of contacts made by Thompson over an uninterrupted 35-year career in the narrow specialty of entertainment and media finance. He joined Bank of Boston in 1954, soon after graduating from Harvard Business School, and quickly became the protege of Serge Semenenko, the bank’s high-flying entertainment lending boss. When Semenenko resigned in 1967, Thompson took his place until he left to start Boston Ventures in August, 1983.
‘Go to Thompson First’
Thompson’s “contacts are tremendous. He knows many, many, many people in the industry at senior levels of companies. . . . A lot of people move in and out of the business. He has a lot of consistency,” said Susannah M. Swihart, who now heads the entertainment lending division at Bank of Boston.
Personal friendships count. When Metromedia’s Subotnick was asked why he chose Boston Ventures, one of his first replies was, “We thought it would be a good way to kick off their company.” Lehman Bros. ended up as advisers to the outside directors on Metromedia’s board.
When Marvin Davis and other heavy hitters in the entertainment industry want to organize a deal in the entertainment industry, a top studio executive said, “They go to him first.”
Businessmen who do deals with Thompson seem to part company with him on good terms. While buying and selling companies frequently generates lawsuits, since Boston Ventures was founded, neither the partnership nor its directors has been sued in federal or state court in Boston. Only one lawsuit in New York has named the partnership as a defendant, a routine age discrimination suit against Billboard Publications, which Boston Ventures controlled from November, 1984, to March, 1987. The case was settled out of court.
“They’re terrific. I had great admiration for them, then and now,” said Marvin Josephson, chairman and president of Josephson International, which sold six radio stations to Boston Ventures in 1986 for an estimated $40 million.
The popularity that Thompson enjoys may reflect in part his refusal to meddle in the day-to-day management of the firms he bankrolls. “He never operates anything,” said Allen, who has known him for a quarter century.
Thompson made no suggestions to Metromedia about how to run that company, although $10 million of Boston Ventures’ money went into the deal, Subotnick said. “If he’d tried, we wouldn’t have listened.”
Boston Ventures sold back its stake to the management group at a profit six months later.
Thompson and his five co-directors, all of whom once worked at the Bank of Boston, employ a handful of financial analysts but delegate very little of the serious number crunching, said a source familiar with the company. “They do an awful lot of it themselves.”
Thompson’s wide-ranging contacts, together with the pivotal role played by the Bank of Boston in financing major studios, led author David McClintick to label him “the most influential movie banker in the world,” in a scathing 1982 book about Hollywood finance entitled “Indecent Exposure.”
Miles Hold Advantage
But asked whether this is true today, one top studio executive strongly disagreed. “He’s an investor. He, along with a number of partners, have been active” in various deals, he said, but so have other rich men. The executive asked not to be identified.
Distance from traditional centers of power in the entertainment industry does not seem to have hindered Boston Ventures. Being based in Boston, far removed from Wall Street and Hollywood, is only a minor inconvenience these days, Bank of Boston’s Swihart said. “I travel a lot. I have to presume they travel a lot. There aren’t a lot of media transactions in Boston.”
But while travel costs may discourage doing small deals on the West Coast, the miles between may hold an advantage on bigger transactions, she said. “The entertainment industry is so glamorous that it helps to cool off. . . . Having some distance helps because you come home, cool off and think about it.”
BOSTON VENTURES’ BIG DEALS
August, 1983--Boston Ventures Limited Partnership files for incorporation in Massachusetts.
November, 1983--BV makes its first filing with the SEC, stating that it has raised $72.13 million from 18 initial investors and plans to raise $110 million.
January, 1984--BV and four top executives of Metromedia Co. agree to pay $1.45 billion for Metromedia, which owned a string of television stations. BV collects a $4-million fee and puts up $10 million to take a 3% stake in the company, which it later sells back to the executives for a profit.
June, 1984--BV and management withdraw a $250-million bid for Standex International Corp, a diversified manufacturer, citing concerns about rising interest rates.
August, 1984--BV tells the SEC that it has raised $112.5 million from a total of 60 investors. Annual management fees for the partnership’s 10-year duration are set at $2.3 million.
November, 1984--BV, with top executives of Billboard Publications, agrees to pay $40 million for the owner of Billboard and Musician magazines. BV takes a controlling interest in the firm and names three directors to the six-member board.
November, 1985--BV agrees to pay $25 million for a 49% stake in newspaper heir Frederick Field’s purchase of movie camera maker Panavision from Warner Communications. BV sells stake to Field six months later.
May, 1986--BV agrees to buy radio stations in five West Coast markets from New York-based Josephson International for an estimated $40 million.
July, 1986--BV buys Boston-based USA Cinemas, then the nation’s 10th-largest movie theater chain. The price is not disclosed.
August, 1986--BV tells the SEC that it has launched a second fund with a goal of $200 million. No subsequent reports are filed, but the fund is believed to have been fully subscribed.
December, 1986--A $625-million purchase of Miami-based Wometco Cable TV, a major owner of cable franchises in the South, is completed by BV, Taft Broadcasting and Robert Bass.
March, 1987--Affiliated Publications in Boston agrees to pay $100 million to buy Billboard Publications from BV.
January, 1988--BV buys 12 cable television systems in the South from Jones Intercable for $106 million.
March, 1988--Columbia Pictures Entertainment completes purchase of USA Cinemas from BV for $165 million.
June, 1988--BV buys the music publishing division of Columbia Pictures Entertainment for an undisclosed price. The deal includes the rights to such titles as “Over the Rainbow,” “New York, New York” and “Singin’ in the Rain.”
June, 1988--BV and MCA Inc. agree to buy Motown Records as 80-20 partners for an estimated $61 million. The deal does not include Motown’s music publishing operations but does include the rights to past recordings by the likes of Stevie Wonder, Lionel Richie, Diana Ross and the Supremes, Smokey Robinson, Michael Jackson, Marvin Gaye and others.
December, 1988--BV buys an AM radio station from RKO General for $17.5 million.
December, 1988--BV and its partners sell all of Wometco Cable’s operations, except for an Atlanta cable system, to CableVision Industries for an undisclosed price.
Sources: Court and FCC documents, Mergers & Acquisitions database, company reports.