Fox Abdication

In Hollywood are the new $75,000,000 studios of Fox Film Corp, Throughout the U. S. are some 1,200 theatres controlled by Fox Theatres Corp. In almost every country are Fox distributing agencies. In sole command of the Fox organization was, until last week, William Fox who from an investment of $1,667 built the entire structure, amassed a personal fortune once estimated at over $50,000,000.

During the summer, Cineman Fox, proud of the quick expansion that had brought his organization Loew's Inc., Metro-Goldwyn-Mayer, and the Gaumont Theatres in England, decided to consolidate all his holdings into one In September the authorized Class A stock of Fox Film was increased from 900,000 to 4,900,000 shares, but the consolidation never took place. Last summer Mr. Fox, injured in an automobile accident (TIME, July 29), was away from his office for almost two months. When he recovered he scarcely had time to start his plan with an attempt to distribute Fox Theatres stock to his patrons (TIME, Oct. 21) before the stockmarket crashed.

To motion picture companies stockmarket breaks do not mean diminished profits, for like tobacco companies they are "depression proof." But at this particular time the stockmarket decline brought severe trouble to Cineman Fox. During the recent period of expansion he had needed great sums of cash. These he had obtained by short-term loans upon the stock of acquired companies. With $91,000,000 of these notes falling due, with his collateral down, with conditions bad for refinancing, Cineman Fox for the first time needed assistance. Last week he summoned aid by appointing a trustee-triumvirate consisting of himself, a banker, a manufacturing engineer.

Triumvirate. Banker of the triumvirate is Harold Leonard Stuart, bachelor president of famed Halsey, Stuart & Co. In 1927 his firm issued a booklet, The Motion Picture Industry as a Basis for Bond Financing, at the same time underwriting their first Fox issue. Trustee Stuart will represent his firm as Fox bankers and his firm's customers as large investors.

John Edward Otterson, president of Electrical Research Products, Inc., a subsidiary of Western Electric, in turn a subsidiary of American Telephone & Telegraph, is the third member of the triumvirate. Twenty million dollars of sound equipment in the 1,200 Fox Theatres was installed by his company. In addition, Western Electric receives royalties on its patents used by Fox, is therefore concerned with the future business of the company.

Almost the first act of the trustees was to appoint Charles Evans Hughes counsel. To him will come not only the routine problems of passing on the legality of the triumvirate's financing, but the problem of facing the suit brought against Fox last fortnight by the Government, charging violation of the Clayton anti-trust law by its ownership of Loew's.

The object of the triumvirate is not to change the policy of the company but to arrange a method for meeting the obligations incurred by Cineman Fox. Assurance that the affairs of the company will remain in such conservative trustees' hands for five years will make lenders more willing.

If any stockholder should object to the membership of the triumvirate, he would have little chance to change it. The 900,000 outstanding Class A shares of Fox Films have no voting power until April, when they may elect five out of twelve directors. The slightly less than 900,000 outstanding Class A shares of Fox Theatres have no voting power at all. But each company has 100.000 shares of a Class B stock with full voting power, supposedly controlled by Cineman Fox. Thus with stocks valued at about $6,000,000 he controls companies whose market valuation is ten times that; easily can he leap onto the throne again, when the period of abdication is ended.

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