Deal from Divan

Invited to Suite No. 31 in the tall tower of Manhattan's Hotel Sherry-Netherland one day last week were picked representatives of the U. S. and British Press. Their host was Joseph Michael Schenck, massive, imperturbable board chairman of Twentieth Century-Fox Film Corp. To each newshawk Mr. Schenck handed, not a highball in the Hollywood tradition, but a formal statement confirming the biggest cinema deal of the year. Then Mr. Schenck plunked himself down in the centre of a divan, flanked by the two other principals in the triple play: his younger brother and competitor, President Nicholas Michael Schenck of Loew's, Inc., and President Isidore Ostrer of Gaumont-British Pictures Corp.

Joseph Schenck's centre position on the divan was appropriate. When he took his Twentieth Century Pictures and his ace producer, Darryl Zanuck, to Fox Film last year, he found Fox in possession of 49% voting interest in a holding company which controlled Gaumont-British. With 450 theatres and the best production in the Empire, Gaumont is the biggest factor in British cinema. The Fox interest in Gaumont-British was picked up by William Fox in 1929 for about $20,000,000, a purchase which later played a large part in toppling the silvery Fox pyramid about Founder Fox's large ears.

Another 49% stake in Gaumont control is held by London's Brothers Ostrer -- Mark, Isidore, David and Maurice. Sometimes likened to a modern edition of the original Rothschilds, the Ostrers describe themselves as "merchant bankers." Their interests do not run to heavy industry. Brother Mark is Gaumont's chairman, Brother Isidore, Gaumont's president. Their other properties include newspapers, hotels and London hotspots. Balance of power between Fox's 49% and the Ostrer's 49% in the Gaumont holding company was placed for reasons of Empire in the hands of Lord Lee of Fareham.

About a year ago dapper Brother Isidore decided that something should be done to lessen international cinema competition. When he mentioned this to Joe Schenck, that U. S. cineman agreed with him. And since plenty of cash might further the idea, they mentioned it to Nick Schenck, who not only runs the most consistently profitable U. S. cinema company, Loew's Inc., but also its prodigious production subsidiary, Metro-Goldwyn-Mayer. After much shuttling between London, Manhattan and Hollywood, Isidore Ostrer and Nick Schenck were able to sit down with Joe Schenck last week and face the Press united.* Their deal:

Nick Schenck's M-G-M will buy from Joe Schenck's Fox one-half its Gaumont-British interest. Asked how much M-G-M would pay for this half interest, Joe Schenck dismissed the question as an "unimportant detail." After the Brothers Schenck settle that "detail" between themselves, the deal will proceed to a second phase, which involves selling Gaumont control to the British public, a detail which will presumably be arranged by the Brothers Ostrer. In the end, instead of Fox owning 49% of the controlling holding company, the Ostrers 49%, Fox, M-G-M and the Ostrers will divide 49% evenly between them.

One reason for this involved series of transactions was to reassure anxious Britons that Gaumont would remain "definitely" British. Another, and probably more important reason, was that it will enable the Ostrers to sell out more than two-thirds of their Gaumont stock to the British public. Joe Schenck will also cash in to almost the same extent through the British public and his Brother Nick. Brother Nick will be the only one left with less cash than when he started.

But Brother Nick did not get stung. The Schencks have never stung each other and have rarely been stung by anyone else. Brought to the U. S. by their parents in 1893, fresh from a little village in the heart of Russia, the Schencks lived a wretched life in Manhattan's slums until Brother Joe scraped together enough money for a pharmacy course. That landed him a drugstore job, and eventually one for Brother Nick. It was not long before they owned the store outright.

With their drugstore profits they snapped up a beer concession at the end of a Manhattan streetcar line in the early 1900's when trolley riding was a regular holiday sport. There they were discovered by the late Marcus Loew, who knew smart showmen when he saw them. The theatre man helped them develop Palisades Park across the Hudson River from Manhattan, which they still own, gave them good steers on other amusement investments. Joe Schenck later went to Holly wood where he married Norma Talmadge and headed United Artists for years. Nick Schenck stuck by Loew's, taking over when the founder died in 1927. For box-office results Nick Schenck likes his pictures sentimental. Once when a feature was submitted for his approval, he shook his head dolefully, pointed to his throat, remarked: "No lump." There was plenty of sentiment in last week's deal which would appeal to stock holders, whose approval must be obtained before any of the plans bear fruit. Part & parcel of the financial proposals are straight business agreements wrhich will benefit all three companies. The when & how of these plans were as vague as Joe Schenck's financial details but the eventual effects were fairly clear. Gaumont will scrap its U. S. distributing organization at a saving of at least $500,000 annually. In return M-G-M and Twentieth Century-Fox will market Gaumont pictures not only in the U. S. but in nearly all countries of the world except Britain. There Gaumont will absorb MGM's and Fox's sales forces, effecting sizable economies for the U. S. companies.

More significant for the Schencks will be savings resulting from consolidation of their British producing units with those of Gaumont. Henceforth, Gaumont will make for M-G-M and Fox the pictures which British law requires a foreign cinema company to produce in Britain under its quota system. For every 1,000 ft. of film which, say, M-G-M exports to Britain, another 225 ft. has to be shot on British lots. Slapped together as cheaply as possible, these "quota" films are even more of an imposition on British audiences than "summer fare" on U. S. audiences. Gaumont, explained Isidore Ostrer last week, will up its production from 24 pictures per year to "almost double that amount and on those expend far larger sums than were hitherto expended by the three competitive enterprises."

* Conspicuously absent from Joe Schenck's suite last week was A. (for Alfred) C. (for Cleveland) Blumenthal, bigtime fixer to cinema tycoons, and onetime boon companion of New York City's onetime Mayor James John ("Jimmy") Walker. Joe Schenck admitted that Mr. Blumenthal had "injected himself" into the deal, gruffed that if Blumenthal had done "anything worthy of compensation he will get it." Mr. Blumenthal's reported compensation: $1,800,000.

This file is automatically generated by a robot program, so reader's discretion is required.