Murdoch licks his chops

Part Two: The continuing saga of how Murdoch began to spread his evil seed throughout America

I have the original manuscript I wrote for the New Times story on how Murdoch took over the New York Magazine empire from Clay Felker.  It is 68 pages of double-space typescript, and it is packed with granular detail of just how Felker came to alienate his board of directors.  I’ll omit most of that and get right to the point:  Smelling blood in the water, Murdoch was closing in, and his target was Clay Felker.

When Mudoch became aware of the troubles at NYM Inc., he took an interest in going after it.  By late November in 1976, Murdoch had a handshake deal with Dorothy Schiff, the owner of the New York Post, to buy the paper from her.  We pick up the story as Felker basks in the glow of press reports that he had played a key role in setting up the deal for Murdoch to buy the Post.  As we will see, while Felker had a feel for the zeitgeist, what I called “a nose for the present tense,” Murdoch had a nose for one thing:  Power and how to exercise it to his own advantage, and nobody else’s…

                                          Part Two

November 20, 1976:  Clay Felker, editor of New York Magazine and CEO of NYM Inc., invites Rupert Murdoch, new to New York City, to celebrate his purchase of the New York Post at Elaine’s, the Upper East Side watering hole for the literary set.  Present for the big dinner are Murdoch; Clay Felker and his “frequent companion” best-selling author Gail Sheehy; writer and raconteur Pete Hamill and his “frequent companion” actress Shirley MacLaine; and uber-investment banker Felix Rohatyn and his girlfriend, name unknown. 

Murdoch described the dinner to me later this way:  Shirley is badgering Murdoch about Australia’s relationship with Red China, of which he claims to know little.  Pete is badgering him about his friend Murray Kempton, who he insists Rupert should hire as a Post columnist (which he eventually does).  Gail is scanning the star-studded room anxiously, looking for anyone in the throes of a mid-life crisis whom she could interview.

In a cab on the way back to Rupert’s Fifth Avenue apartment, Felker tells Murdoch that he “must” see him, and the sooner the better.  Murdoch has heard about Clay’s problems with his board of directors, but this time there is an urgency in Felker’s voice that catches the ear of the ever-ready-to-pounce Murdoch.  Could this be the long-awaited time to move on NYM Inc.?  Murdoch has been playing a waiting game, and now he spies his chance.  A lunch date is made.

November 21:  According to what Murdoch later told me, the day after the celebration dinner at Elaine’s, Felker called Dorothy Schiff and told her that real estate mogul Peter Sharp would pay her more for the Post than Murdoch’s offer, which was after all still in the handshake stage.  Sharp, Felker tells his close friend Schiff, would appoint him editor and publisher.  Schiff, according to Murdoch, made a note of the conversation and later told Murdoch about it.

Apparently, Felker believed that by setting up the Murdoch/Schiff deal, he would have an escape hatch at the New York Post in the event that he lost control of NYM Inc., which had been slipping from his grasp due to his constant struggles with his board.  “It must have dawned on him at dinner at Elaine’s that despite his key role in the sale of the Post, I wasn’t going to make him publisher,” Murdoch told me.  “Covering himself, Felker called Schiff with his counter-offer on behalf of Peter Sharp.”

Later, Felker would admit to me that he called Schiff, but said his reference to Peter Sharp buying the Post was made “jokingly.” Felker claimed that he had never been interested in being publisher of the New York Post.

November 29:  Murdoch meets Felker for lunch in the staff dining room at New York Magazine.  Murdoch, recalling the lunch later in a late-night interview at his apartment just after he got off a flight from Sydney, Australia, raised his eyebrows at Felker’s machinations.

“Clay begins by running back over his troubles with the board,” Murdoch says, looking amazed at Felker’s innocent blatherings. “So I say, ‘Listen, Clay, you’re got banking friends, Felix Rohatyn in particular.  Why don’t you work it out with him?’ Felker listens, but I never got the impression that he was focusing on his problem.  He saw it in such narrow terms.  Get rid of this guy on the board, get rid of that guy – he figured all he had to do was get some of his friends on the board and everything would be okay.”

At this point, Murdoch gives me a look like, can you believe this guy?

“Well, things went on,” Murdoch continued, his wife sitting across the living room from us with her knitting.  “And Clay let on that he might be looking for a buyer.  I told him I had an investment banker at Allen & Company who had worked with me on the Post negotiations.  It was Stanley Shuman.  I said, perhaps we can work something out.  This seemed to perk Clay up.  I had the feeling this was the first time anyone had talked seriously to him about buying into the corporation.  We left the lunch with a commitment to get together the following week.”

Felker’s version of the lunch was quite different:  “I told him at lunch, ‘You’re a wiz at making these deals, Rupert.  You know a lot about corporate structures and how to operate. This is not my great area of expertise.’  I had been giving him a lot of advice in relation to the Post, names of editors and writers he should hire, all kinds of advice.  He would just call me up and I would give it out.  In return, I was asking personal advice on how to get out from under these guys on my NYM Inc. board.”

So Felker thought he was just chatting with a friend about the journalism game, but Murdoch heard only one thing:  New York Magazine was for sale, and Felker was looking for a deal.

November 30:  Investment banker Shuman calls fellow-investment banker and NYM Inc. board member Alan Patricof.  They talk informally about who the major stockholders are.  It is evident that with or without Felker, Murdoch has begun his move to take over NYM Inc.

December 2: Felker issues memos to his staff at New York and the Voice denying an item in Media Industry Newsletter that NYM Inc. is up for sale.  “I wish to state authoritatively and unequivocally that the New York Magazine Company is not for sale.  We are not negotiating with anyone, nor will we.  The only way this company can maintain its editorial independence and integrity is to remain independent.”

December 3:  Patricof meets powerhouse labor negotiator and Felker-friend Ted Kheel at a party and suggests that Felker should be busy finding a buyer for loose shares of NYM Inc. that are known to be available.  “Clay should make moves to control his destiny.”  Kheel asks, “Can I tell Clay?”  Patricof almost chokes on his pastry-wrapped sausage Hors D’oeuvres.

December 9:  Murdoch, investment banker Shuman, and Felker meet at Murdoch’s offices at 730 Park Avenue.  As Murdoch later recalls the meeting to me, Felker was panicky.  Felker knew his company was in bad shape, and that some board members were trying to sell it out from under him.  “There was open hostility.  The board didn’t trust him, and he didn’t trust them,” Murdoch recalled.  “It was the same old story.  At lunch the week before, he had been talking about moving to L.A., going back and forth with Gail, keeping the apartment in New York at company expense, but essentially moving his base of operations to the West Coast.  So I said to him, ‘Listen, Clay, if you can’t work with your own board, how can you expect to work with me?  Shuman and I have talked this thing over, and we think we have a solution.  You want to move to L.A.?  Maybe we can make a deal.  We’ll buy the company.  You’ll walk away with something like $1 million after taxes.  Then we’ll spin off New West, make it a separate company, and you can buy it with your cash from the NYM Inc. sale.  We’ll even be willing to lend you some capital to buy yourself and Milton (Glazer, the famous type and magazine designer who designed New York and had long been Felker’s partner) a larger piece of New West.  And no matter how large a piece you buy, we will be willing to give you voting rights over 51 percent of the board.”

“Clay’s immediate response was: ‘Will I own 51 percent?’  That would depend, I explained, on how much capital he and Milton Glazer were able to raise to buy-in on the deal.  Then he wanted to know if we would be willing to lend the New West company $1.5 million in operating capital.  I replied, that might be arranged, but we would want some control until the loan was paid off.  For a while there, I thought we were going to make a deal.  But as soon as I mentioned control in return for the operating capital loan, Clay looked unhappy.  The meeting ended, and we decided we would talk later.”

“Meanwhile,” Murdoch said, yawning and stretching his legs, obviously tired from the long flight from Australia, “Shuman and I have learned that Felker is hawking the company all over town, looking for a deal.”

Felker’s version:  Murdoch proposed a deal similar to the one described above, “But when I asked them about lending us some money for New West, Murdoch turned to Shuman, and Shuman shook his head negatively.  This is my best recollection.  They were talking about offering $5 per share to buy out NYM Inc., and then spin off New West as a separate company for me and Milton.”

Allen & Company investment banker Stanley Shuman, whom I interviewed after talking to both Murdoch and Felker, pulled out a diary he had kept throughout the transactions and paraphrased from it:  “Clay was looking for unfettered control over money and editorial in any kind of deal we made.  We told him we would be willing to buy NYM Inc. and set him up with New West.  But nothing seemed to make him happy.  He seemed to be living in a dream world.  The one thing he was definite about was that he would never be able to deliver his board of directors in any kind of deal.  Of course, by that time, Rupert and I had figured that out.  We didn’t need Clay to deliver the board.  The board was ready to deliver the company to us without him.”

A few days later, according to Felker, he called Murdoch and said he didn’t “want to take things any further.”  But it was already too late.  By now, Murdoch and Shuman are meeting with lawyers and mapping strategy.  Their target is City Councilman and Vanderbilt heir Carter Burden and the 24 percent he owned of NYM Inc. stock.

Murdoch: “Clay had really set himself up for the fall.  There he was, personally holding the rights of first refusal over Carter Burden’s stock, and he already knew we were moving on Carter.”  Murdoch stops, and I could see him trying to conceal his astonishment at what he was about to tell me.

“You know what Clay’s girlfriend Gail Sheehy told Byron Dobell (Felker’s managing editor at New York)?  She said, it was Clay’s midcareer crisis.  He was bored with New York, bored with the whole thing.  But he was blocked.  He had no easy way out.  When he sat down to talk with us, with me and Stanley (Shuman), Gail said it was Clay’s way of breaking through.  If that’s true, Clay Felker just whetted our appetite.  The more we looked at the New York Magazine empire, the more we wanted it.”

December 17:  Murdoch and Shuman meet Peter Tufo (Carter Burden’s lawyer and a member of the NYM Inc. board) and Tufo’s “frequent companion” Princess Lee Radziwill (Jackie Kennedy Onassis’ younger sister) at Parioli Romanisssimo (at the time one of the hottest restaurants in New York.) 

Murdoch (looking delighted to tell the story): “Incredible scene.  Here we are, sitting around this table, and I’ve got the Princess on my left, talking to me endlessly, and with the other ear, I’m trying to overhear Shuman romancing Tufo, trying to bring the price down. Tufo was talking $7 a share, and our idea was around $6.  So Shuman is laboring away with Tufo – he’s much better at these things than I, actually – and I’m having to make two and a half hours of small talk with the Princess, which I’m even worse at.  Incredible.  Finally, Tufo’s two-way radio goes off, and he has to rush to Rikers Island or something, and we’re saved.  We left with no deal, but we figured that at $7 a share, we’d preempt anyone else interested in acquiring NYM Inc.”

To be continued