Does Marvin Davis Really Want to Run United Airlines?

Marvin Davis, Los Angeles’ richest man with an estimated net worth of $1.6 billion, has serious money. But is he a serious takeover artist?

That question surfaced again Monday in the wake of his reported $4.3-billion bid for UAL, parent of United Airlines. Coming on the heels of his unsuccessful bid for the parent of Northwest Airlines and short-lived or unsuccessful forays into other firms, skeptics wonder if he is serious about buying companies and running them, rather than simply pocketing quick profits by putting companies into play and then selling their stock to higher bidders.

“The street doesn’t take him seriously,” said an investment banker familiar with past Davis takeover salvos. “I don’t think anybody in the market thinks Marvin will be the ultimate buyer of UAL.”

“It’s our feeling that he (Davis) is interested more in the deal rather than running (UAL),” analyst Paul Turk of Avmark told the Associated Press.

But Davis insiders say the skeptics are wrong. While Davis has bought and sold several assets and companies quickly in the past, they say his acquisition strategy has evolved into that of a long-term player.

He now is in pursuit of a more lofty and historic goal: to become an American industrialist and establish his family among the ranks of the Rockefellers and others who amassed fortunes in business and left a philanthropic legacy as well, declared John A. Davis, Marvin Davis’ 31-year-old son and one of the Davis family’s chief strategists. Much as a racehorse owner might collect a stable of fine thoroughbreds, Davis hopes to amass a stable of strong companies.

“Our strategy is to become industrialists,” the younger Davis said in the absence of his father, who refused to be interviewed. “We want to form a strong base of companies. We’re building an operating empire. And I think we’re on the road to accomplishing that.”

“Marvin is a serious participant in the deal business, no question about that,” said George A. Vandeman, Davis’ attorney at the Los Angeles firm of Latham & Watkins.

Few Transactions Concluded

Marvin Davis can certainly put enough money where his son’s dreams are. After amassing his fortune in oil wildcatting and selling the bulk of his energy properties in 1981 before oil prices plunged, Davis has enough wealth and borrowing power to acquire companies worth a total of $10 billion to $11 billion, the younger Davis said.

But there’s still much in Davis’ record to merit considerable skepticism.

He acquired 20th Century Fox and then sold it only a few years later, pocketing a $350-million profit. He purchased the Beverly Hills Hotel but sold it a year later to the Sultan of Brunei for an estimated $50-million windfall. He bid $2.7 billion for NWA, Northwest Airlines’ parent, only to be outbid by Los Angeles investor Alfred A. Checchi. But he earned a $30-million net profit from selling his NWA stock.

Davis in recent years also made unsuccessful bids for CBS, Lorimar Telepictures, Resorts International and the Denver Post, to name a few.

“If you take a look at his record . . . very few of his transactions does he actually conclude,” says a Wall Street investment banker who asked not to be identified. Talk of the family wanting to become industrialists is merely public relations rhetoric to give son John a cleaner reputation than his 63-year-old father’s, the investment banker said.

“Marvin is coming to the end of his career and doesn’t want John to inherit the same reputation,” the investment banker said.

But the Davis group insists things are different now. The money it can make from buying and selling assets quickly is not worth the effort and expense, the younger Davis said.

“We already have enough money,” he said, adding: “I’m a young guy. These are the type of businesses we could own forever.”

Instead, Davis’ bid for NWA, and a $635-million purchase this year of Spectradyne, a company that provides pay-per-view movies to hotels, marks a turning point.

‘Checchi Bid Too Much’

In the NWA case, the Davis group spent two years studying the airline industry and its prospects. Davis was simply outbid at a price he was unwilling to pay.

“I think Checchi bid too much,” the younger Davis said, adding, however, that the Davis family could always come back in the future to buy NWA from Checchi if it discovers that the airline is worth even more.

“We spent $20 million in fees and expenses in the Northwest deal,” the younger Davis said. “You don’t spend that kind of money unless you are serious.”

Many analysts agree that Davis was serious about acquiring NWA and that he is not willing to overpay on deals.

“If NWA is any guide, it’s fair to say he’s not going to overpay and he’s not going to get into a bidding war,” said one Wall Street airline analyst.

The younger Davis said the family’s strategy on operating its stable of companies will be similar to that of Kohlberg Kravis Roberts & Co., the nation’s preeminent leveraged buyout firm, or to the billionaire Bass brothers of Texas. Both have amassed far-flung corporate holdings, but oversee them with only a skeleton staff of key executives that review major strategic decisions. They leave day-to-day operational matters to on-site managers.

“The benchmark on our part is strong management” that is given proper incentives, the younger Davis said. “With NWA, we were not going to be running the airline day to day. We would be overseeing major strategic decisions.”

As for further acquisitions, the younger Davis said his family will seek companies in industries that it is comfortable with, such as entertainment, travel and leisure. It also will seek companies or assets with one-of-a-kind reputations, such as the Pebble Beach golf resort or ski resort in Aspen, both acquired in the 20th Century Fox deal and retained.

MAIN STORY: Part I, Page 1

TARGET UAL Corp. (1989) PRICE OFFERED $4.32 billion STATUS New RESULT UAL, parent of United Airlines, says its board will consider the offer. TARGET Spectradyne (1989) PRICE OFFERED $635 million STATUS Bid accepted RESULT This is second attempt. In 1987, Davis withdraws his earlier$322-million bid. Spectradyne is the nation’s largest supplier of cable television and pay-per-view movies for hotels. TARGET Warner Communications (1989) PRICE OFFERED -- STATUS Rumor RESULT A formal offer for entertainment giant is never announced. At the time, Warner is struggling to complete its own merger with Time Inc. TARGET NWA Inc. (1989) PRICE OFFERED $2.7 billion STATUS Bid rejected RESULT NWA, parent of Northwest Airlines, rejects Davis’ hostile bid in favor of Los Angeles investor Alfred Checchi. TARGET Eastern Airlines (1989) PRICE OFFERED -- STATUS Rumor RESULT It is never confirmed that Davis is among the bidders for troubled, strikebound carrier. TARGET Lorimar (1988) PRICE OFFERED $770 million STATUS Bid rejected RESULT After turning down Davis, Lorimar agrees to merge with Warner Communications in a $619-million stock swap. TARGET Resorts International (1987 PRICE OFFERED $191 million STATUS Bid rejected RESULT Resorts accepts a bid by New York developer Donald Trump. TARGET CBS Inc. (1986) PRICE OFFERED $3.75 billion STATUS Bid rejected RESULT “Friendly” offer made by Davis and unnamed associates is turned down by CBS. TARGET Beverly Hills Hotel (1986) PRICE OFFERED $135 million STATUS Bid accepted RESULT Davis purchases the hotel from Seema Boesky, wife of financier Ivan F. Boesky, and her sister. He sells the hotel in 1987 to the Sultan of Brunei for an estimated $185 million. TARGET Laird International Studios (1986) PRICE OFFERED $20 million STATUS Bid rejected RESULT Davis is outbid by media giant Gannett for the historic Culver City film lot. TARGET 20th Century Fox (1981) PRICE OFFERED $800 million STATUS Bid accepted RESULT With partner Marc Rich, Davis takes company private. Later, Davis buys Rich’s 50% share and eventually sells Fox to Rupert Murdoch in 1985. TARGET Denver Post (1980) PRICE OFFERED $75 million STATUS Bid withdrawn RESULT Davis withdraws his offer to buy the newspaper. TARGET Oakland A’s (1977) PRICE OFFERED $12.5 million STATUS Target withdrawn RESULT A’s owner Charles O. Finley, withdraws his offer to sell the baseball team after the Oakland Coliseum files suit to block the sale. TARGET Other PRICE OFFERED -- STATUS -- RESULT Among the other organizations that Marvin Davis reportedly expressed interest in buying, but for which formal offers were never made, are: the San Diego Padres baseball team, the Dallas Cowboys football team and the Los Angeles Herald Examiner.