- Share this article on Facebook
- Share this article on Twitter
- Share this article on Flipboard
- Share this article on Email
- Show additional share options
- Share this article on Linkedin
- Share this article on Pinit
- Share this article on Reddit
- Share this article on Tumblr
- Share this article on Whatsapp
- Share this article on Print
- Share this article on Comment
When one-time fugitive and commodities trader Marc Rich died at age 78 on June 26, most of the headlines on his obituary recalled Bill Clinton‘s last-minute presidential pardon in January 2001.
But Hollywood remembers Marc Rich differently — in showbiz lore, his brief ownership role at 20th Century Fox led to a quick $134 million windfall for his erstwhile partner, Marvin Davis. It’s universally regarded as Hollywood’s slickest deal.
PHOTOS: The 20th Century Fox Logo: A Brief History
A native New Yorker-turned-Denver oil man, Davis inherited a petroleum business from his father and then built his fortune wildcatting. A 6-foot-4, 300-plus-pound giant of a man, he became a giant in business as well, parlaying his profits into an empire that included vast swaths of real estate. He even bought a Denver movie theater as a plaything; he loved movies, you see, and so did his family. Davis and his wife, Barbara, also became known for their philanthropy, especially the annual Carousel Ball that raised millions for children’s diabetes — from which their daughter suffered.
One of those who attended that Carousel Ball was Marc Rich, who ran a New York City hedge fund and traded commodities, most notably oil. In the 1970s, after an Arab-led oil embargo shook the global supply chain, Rich pioneered the spot oil market, which allowed buying and selling of any oil that was available. Davis recruited Rich to invest $50 million into some of his oil drilling deals. It was the first of the pair’s deals — but it wouldn’t be the last.
In 1981, Davis made a deal to buy the venerable but troubled 20th Century Fox movie studio. At the time, Davis didn’t disclose the source of his funding, which included a $550 million loan from the Continental Illinois National Bank. Davis also never noted that he had a silent partner who would own half the studio — Marc Rich. And although Rich would own half of the studio, Davis retained 100 percent of the voting control.
Nobody was more surprised that Davis had a silent partner than the 20th Century Fox board, which learned about Rich’s involvement shortly before the sale was to close. Even so, on June 8, 1981, in Los Angeles, the Fox board voted to sell the studio and its assets for $722 million.
Davis began running the studio like his personal fiefdom. He quickly spun off or sold noncore assets to raise money that paid down debt and paid dividends to Rich and himself. These assets included the Pebble Beach Golf Club and an Aspen, Colo., ski resort. Davis sold pieces of Pebble Beach and the resort to insurance giant Aetna for $184 million, and nearly a decade later sold the rest of Pebble Beach for $840 million — more than he paid for the studio and all its assets.
And that’s not all: Also sold were Coca-Cola bottling plants, movie theaters in Australia and New Zealand, Fox’s music publishing division and surplus real estate in Century City (including the parcel where Fox Plaza now stands, the building made famous in the original Die Hard movie).
Davis almost sold the movie and TV operations to MGM, then owned by Kirk Kerkorian, but got cold feet at the last minute. Why? He was having too much fun playing movie mogul. He moved his family to Los Angeles, bought a mansion, and was hanging out with famous stars like Cary Grant and former President Gerald Ford, whom he put on Fox’s board.
While he was supposed to be a silent partner, Rich began complaining that Davis wasn’t selling enough assets, and that he wanted a faster return. Rich got tired of being silent, and in January 1982 filed a petition with the Securities and Exchange Commission for equal voting rights in Fox with Davis.
It turned out to be a moot point. In 1983, Rich and his business partner Pincus Green were indicted by the federal government on 65 criminal charges, including evading $48 million in taxes, wire fraud, racketeering and trading oil with Iran in violation of an international embargo. Rich’s response was to get on a plane and flee to Europe — eventually landing in Switzerland, where the U.S. could not extradite him.
Despite the good time Davis was having in Hollywood, the studio’s operations were more like a real-life disaster movie. In his first two years, the studio had lost millions and debt had ballooned.
Meanwhile, the U.S. government seized all of Rich’s assets within its reach, including his 50 percent interest in Fox. The government was anxious to liquidate what it could to pay down what Rich owed, and Davis, a famous trader and deal maker, used that to his benefit. Pointing to the studio’s losses and the sale and spinoff of many assets, Davis convinced the government to sell him Rich’s shares for the bargain-basement price of $116 million — one-sixth of what he and Rich had bought the studio for only two years earlier.
Davis, trying to bolster the studio, hired Barry Diller to run movie and TV operations. Diller, who had proven his skills at Paramount Pictures, insisted on a contract that gave him complete authority to run the studio and allowed Davis to speak only to him. In short order, however, Davis ran roughshod over Diller’s contractual rights. Diller was also alarmed to find out the studio was in financial difficulty and Davis was unwilling to do a stock or junk bond offering or pump in any money.
With Diller threatening a lawsuit, Davis considered selling half the studio and found a ready buyer in newspaper baron Rupert Murdoch, who after threatening a corporate takeover at Time Warner had just sold his shares back to the company at a big profit. Murdoch wanted to buy the whole studio but Davis was only willing to sell half. So less than a year after he had made the deal with the government, Davis sold Rich’s half to Murdoch for $250 million – immediately pocketing $162 million as his personal share.
Davis soon found he was at odds not just with Diller but also Murdoch. They both wanted to acquire the Metromedia TV station group as the basis for a new TV network, and Davis did not. But Davis was hesitant to sell out. He and his family loved the fame and lifestyle that came with the studio. When asked years later why he sold, Davis said that he was a trader, and when a trader is offered a price he thinks overvalues an asset, he just has to sell.
STORY: Film Financier Sues 20th Century Fox Over Mysterious Investment (Exclusive)
So in September 1985, Davis sold the other half of the studio to Murdoch for another $325 million, ending his run as an unlikely mogul, leaving him with a tidy profit on his investment and finally providing Murdoch his long-sought entry into the U.S. entertainment business.
While Davis got the best of Rich when it came to the Fox deal, over the years each took different paths. When Davis died in 2004, his net worth was estimated at north of $5 billion — but a year later his oldest daughter sued her mother and siblings charging that Davis was actually nearly broke, and that he had looted her trust fund to keep going. His widow sold her big L.A. home and moved into the Beverly Hills Hotel (which Davis had once owned).
The oil company Davis founded went bankrupt two years after his death and was sold for $150 million, a fraction of what it had been worth in prior years.
Rich, meanwhile, continued to live like a king in Switzerland, surrounded by his fabulous art collection, still close with his two daughters and the ex-wife who engineered the pardon from President Clinton (who later regretted having granted it).
Rich continued doing business and building his fortune, was honored in Israel for his humanitarian work and huge donations to medical research, and by the most conservative estimates had a fortune that exceeded $1 billion at the time of his death. He was buried in Israel.
THR Newsletters
Sign up for THR news straight to your inbox every day