Anschutz’s Ambitions Are Theatrical

Philip Anschutz, who is seeking to acquire majority ownership of Orange County’s Edwards Theatres chain, may be the least known but most important businessman in Southern California.

Anschutz, of course, is the sports investor who parlayed ownership of the Los Angeles Kings hockey team into development of Staples Center, in which he holds more than 50% ownership. He also owns 25% of the Los Angeles Lakers.

Anschutz now wants to build a hotel and entertainment center on land across the street from Staples Center in downtown Los Angeles.

Through the entertainment and investment divisions of his Denver-based, privately held Anschutz Co., he also owns an arena in London, is building an arena in Berlin and trying to build a tennis and soccer stadium in Carson. He owns the Los Angeles Galaxy, Colorado Rapids and Chicago Fire soccer teams, plus four hockey teams in Europe.

The arenas and sports teams are not a wealthy man’s playthings, but an assemblage of assets toward a goal. “We want to be the largest live entertainment company in the world,” says Tim Leiweke, president of Staples Center and a key Anschutz executive.

Anschutz’s activities in Los Angeles don’t stop at sports and entertainment. His private company owns Pacific Pipeline, an oil pipeline that runs from Kern County to refineries in Wilmington and El Segundo. Anschutz succeeded in getting it built in 1997 over initial opposition of the Los Angeles City Council.

And Anschutz owns 18% of Qwest Communications, which has the largest fiber-optic network for data, voice and picture transmission in the U.S. Last year Qwest took over US West, the former Bell telephone company for the Rocky Mountain states. He succeeded a few years ago in gaining approval, against stiff local competition, for a Qwest fiber-optic line to serve Los Angeles.

The way Anschutz created Qwest shows why many people are watching to see what he has in mind for the three theater chains he’s buying--of which Edwards is the smallest.

Anschutz built Qwest out of the old Southern Pacific Railroad, which he bought in 1988, parlaying his ownership of the small Denver & Rio Grande Western Railroad.

Along Southern Pacific’s rights of way and those of other railroads, Anschutz laid fiber-optic cable for what he perceived to be the next wave for telecommunications.

In 1995 Anschutz sold the railroad property to Union Pacific Corp. for $3.9 billion--a profit on his original Southern Pacific investment of $1.6 billion. Today he is Union Pacific’s largest shareholder.

Anschutz’s wealth, based only on his public holdings of Qwest and UP, stands at about $12.5 billion. But that doesn’t count real estate and oil and gas holdings in Colorado and other Western states that formed his original fortune.

A native of Russell, Kan., Anschutz, 61, has worked and lived in Colorado most of the last 40 years since his 1961 graduation from the University of Kansas.

Now Anschutz is buying theater chains that have landed in bankruptcy after an overexpansion in that business. Anschutz has just acquired United Artists theaters, and he is the largest debt holder in Regal Cinemas, the nation’s largest chain, of which he is also trying to gain control.

Anschutz buys at bargain rates. He may get to control Regal for about $400 million, according to analyst Matthew Harrigan of Janco Partners, a Denver hedge-fund investment company. The owners, two leveraged-buyout firms, paid $1.2 billion for Regal three years ago.

For a controlling interest in the Edwards chain of 70 theaters, many of them only recently built or remodeled, he may pay roughly $300 million while leaving the Edwards family a substantial share of ownership.

By purchasing theaters at a low price and renegotiating their leases, Anschutz can simply run the properties at a profit.

But most businesspeople expect Anschutz to do more. They’re looking at the opportunity and at his track record.

First, there is opportunity in the coming change in movie technology. Films are distributed to movie theaters today just as they always have been, in film canisters that are trundled around to the thousands of screens showing each movie. The costs of prints and handling are enormous.

But within the next five years, digitally recorded movies will be distributed directly to theaters via the Internet. The cost savings will be impressive. Thanks to his ownership of so many theaters, Anschutz will reap a substantial share of those savings.

Anschutz also will be involved through Qwest’s fiber-optic network, which can beam entertainment worldwide. Movie theaters then could become showplaces for all sorts of Internet programming.

Anschutz signaled that he has plans for digital distribution of entertainment two years ago when he bought a Nashville company that has enormous facilities for storing programs in digital form, plus video production and transmission equipment.

Anschutz’s proposed entertainment center across from Staples will include a 7,000-seat theater. It seems a safe assumption that Anschutz will, as he has before, use his business assets in multiple ways.

Sports arenas, whether presenting soccer matches to Latin America or rock concerts to the world, “are simply enormous sound stages,” says an Anschutz Entertainment executive.

For most of the last decade, Anschutz has focused on Los Angeles and Southern California. “He sees this as the frontier,” says a local businessman who has watched him.

Not many speak openly of Anschutz, and he is legendary for not giving interviews or appearing in the limelight himself.

When businesspeople do speak, it is to admire his tenacity--Anschutz’s oil pipeline was the first to be built in Los Angeles in 35 years--or to complain that Anschutz remains aloof from the community. A major fund-raiser in Los Angeles says curtly that the wealthy Anschutz “doesn’t open his checkbook much.”

Still, as Anschutz’s business operations and his importance increase in this area, he will of necessity become a better-known figure.

Meanwhile, the point for average businesspeople and investors to keep in mind is not that Anschutz buys whole theater chains or railroads, but that he moves shrewdly.

Anschutz’s operations today, including Qwest, are not encumbered by a lot of debt. The arenas and theaters make money in their present form.

“He’s not forced to make a move,” says Michael Tennenbaum, head of a Los Angeles investment firm and an admirer of Anschutz. “He can choose his timing.”

And in business, Anschutz said years ago in a rare interview with Forbes magazine, “timing is everything.”

*

James Flanigan can be reached at jim.flanigan@latimes.com.