In relinquishing his film mogul role to Rupert Murdoch, oilman Marvin Davis is reaping a profit far larger than that of any movie produced by 20th Century Fox during his four-year ownership.
The $325 million in cash that he is due to receive from Murdoch for his remaining 50% stake in Fox compares to his initial equity investment of $50 million in the studio.
That coup, however, masks a string of problems and retrenchments that have affected, sometimes severely, nearly all of his businesses--difficulties that could influence his future business strategy.
- Last April, Davis sold off what is believed to be nearly all of his producing oil and gas wells and the bulk of his most promising developmental acreage to Minneapolis-based Apache Petroleum for $180 million. Davis also last year liquidated most of his other oil-related assets, including a 150-mile pipeline in Wyoming, where he has concentrated his activities since the 1960s.
- The headquarters staff of Denver-based Davis Oil has been cut back, offices have been closed and Davis' oil and gas operations have been reduced to some very modest drilling, mainly for gas near the Louisiana coast.
- In July, Aetna Life & Casualty, which had made a $168-million investment in Davis Oil properties, sued Davis alleging fraud. Aetna also claimed that, in June, Davis had reneged on a settlement that he had earlier accepted obligating him to buy out Aetna's properties for $50 million. Davis Oil denied the charges.
Other prominent Davis investors, most of whom asked that their names not be used, have told The Times that they are also unhappy, and one group recently notified Davis that it may sue as well.
- Davis' plans--fashioned in the 1960s--to build a major banking network in Colorado have been set aside. Metro Bank Corp., a holding company controlled by Davis that owns Metro National Bank in downtown Denver, lost $6.6 million last year, which wiped out two-thirds of its net worth. Metro National's assets have declined from $196 million in 1983 to $173 million today. The holding company experienced such severe cash-flow problems late last year that it was briefly in default on a loan from Texas Commerce Bank. A much smaller Davis bank in the suburbs also has been losing money.
- Development of real estate properties held by Miller-Klutznick-Davis-Gray Co., a partnership in which Davis has the major interest, has been delayed, mainly due to poor market conditions.
To what extent difficulties with Davis' businesses have affected his personal financial condition is impossible to say. There is evidence that they have produced so little cash over the past few years that Davis came to have most of his liquid assets (equity plus at least $160 million in loans) tied up in Fox. This and Fox's urgent need for more capital, some sources argue, may have been a motivation behind his initial recruitment of Murdoch as a partner last April.
Davis Oil is owned by Davis and his family, and Davis is extraordinarily private, especially about his finances. He almost never talks to the press and declined to be interviewed for this story. But a Davis spokesman contends that Davis' cash position has never been better.
There have been reports that Davis, who owns a large house in Beverly Hills, is now interested in making a run at another entertainment firm, perhaps Warner Communications, or starting an independent movie production company. There also has been speculation that Davis may renew his effort to lure a major league baseball team to Denver.
Some believe that Davis may simply relax and enjoy his money for a while. But those who know him well disagree.
"I would be absolutely dumbfounded if Marvin were just to pull out and retire," says former President Gerald R. Ford, a longtime friend who has invested with Davis. "That just isn't Marvin."
Opportunities in his traditional business ventures, however, have been dampened, mainly by current economic conditions.
Real estate at first might seem a candidate for Davis' energies, though Davis to date has been just a passive investor in the MKDG firm. Under his deal with Murdoch, MKDG, in return for relinquishing its interest in most of a 63-acre plot around Fox's Century City headquarters, will obtain full ownership (and assume considerable associated debt) in two major Fox holdings--Pebble Beach Co. and Aspen Skiing Co.--of which it now holds 50%.
Largely Vacant Land
The soft real estate market, however, has adversely affected all of the Davis holdings, which are largely vacant land. Though MKDG (including a predecessor firm) has been operating for nearly eight years, it has not served as lead manager for a single completed new development. It has been more active recently in reducing its exposure by selling off interests in its properties.