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Harris

Even in death, AMC Entertainment Inc. founder Stanley Durwood has us guessing. Will his voting stock, placed in trust, keep the big movie-theater company independent?

Durwood died earlier this month at his home in Kansas City, Mo., three weeks shy of his 79th birthday. His struggle with esophageal cancer was public knowledge; AMC’s stock price rose on speculation that AMC would become a takeover target.

But not so fast. Durwood cast a long shadow. Through estate-planning and market forces he set in motion, AMC may not be a quick takeover candidate. Rival theater companies are showing scant interest this year in mergers and acquisitions because they’re busy building megaplexes a Durwood innovation. AMC opened the “world’s largest megaplex” in 1996 with 30 screens and stadium seating in Ontario.

What a legacy! Durwood’s imitators are so caught in the megaplex revolution that AMC with gemlike assets might be temporarily out of reach. Most theater-company stocks are depressed because of costly construction programs and a loss of business from older theaters, as the megaplex trend sweeps the country.

AMC, in the forefront of the building craze, is the most leveraged of the four largest movie exhibition companies with publicly traded shares. AMC management recently raised ticket prices and will probably trim costs. Change is inevitable because Durwood was simply one of a kind.

Innovative and eccentric, Durwood strove to build a better mousetrap, making the movie-theater experience more enjoyable for audiences (cup-holders, plusher seats, well-trained staff) while charging slightly lower admission than his competitors. Durwood always contended that his pricing strategy could draw more business to AMC theaters, despite evidence that movie-goers care more about a film’s start time and location.

“He left many hundreds of millions of dollars on the table with his pricing policy, but it was his company,” says Don Harris, the former head film buyer for AMC who now oversees theater sales for DreamWorks SKG.

And how. Durwood groomed, then ousted, a series of top managers, including his eldest son. He held on to 67.5 percent of the voting stock, even after distributing shares in 1997 to his six grown children, who’d threatened a lawsuit.

According to the company’s most recent proxy, Durwood placed his voting stock in a trust that will terminate in 2030. Two longtime friends an AMC director and the company’s general counsel are the trustees.

If takeover offers materialize, the trustees will have to juggle their dual responsibilities to shareholders and Durwood’s trust a potential conflict noted privately by some Wall Street analysts.

AMC has wrestled with conflict-of-interest charges in the past. In 1997, Durwood and three former or current directors agreed to pay $1.3 million to shareholders to settle a lawsuit that alleged self-dealing. Durwood dissolved a family-owned partnership which had collected fees for work allegedly performed by AMC employees.

Durwood had the ego and independence of an entrepreneur. He was Harvard-educated, but made no secret of his faith in astrology. In business meetings, he quickly elicited (and memorized) birth dates because he believed personality traits were influenced by birth signs.

He was a proud athlete into his 70s, who startled more than one New York banker or Hollywood executive with challenges to match his one-armed push-ups.

Durwood continually experimented with his theaters and astonished film distributors with his proposals. He tried and discarded wheeling vendor carts down a theater aisle (too disruptive) and installing microwave ovens for popcorn (too slow).

“I fought him but I never laughed at him,” says Phil Barlow, executive vice president of the Walt Disney Motion Pictures Group. “The beauty of Stan was that he kept trying things.”

Durwood was born to a show-business family in 1920. His father, Edward Dubinsky, and an uncle performed in traveling tent shows before they settled in Kansas City to lease and operate a theater. Later, the family changed its name to Durwood.

Following his graduation from Harvard and two years of military service, Durwood joined the family business in 1945. He took the helm upon his father’s death in 1960. He bought out his younger brother and sister and renamed the company American Multi-Cinema Inc. in 1968.

After taking the company public in 1983, Durwood drove AMC near a precipice in five years, with rapid expansion in the United States and construction of the first multiplex in England. To survive, he had to sell his British venture, but he rebounded in the ’90s.

Durwood appeared to be grooming his son, Edward, to take the reins, but in 1995 he abruptly fired his 46-year-old offspring. Two years later, Durwood agreed to parcel out stock to all six of his children to settle a family quarrel.

Each child received 1.4 million shares, but agreed to sell a portion of those shares last August, leaving them with an aggregate 33.3 percent of AMC’s common stock. The children agreed not to solicit proxies or join any group until August 2000.

To help boost the stake of current management, the company loaned almost $9.4 million to its two top officers (Peter Brown, now chairman and chief executive, and Philip Singleton, the chief operating officer) for the purchase of AMC shares last year.

Neither Brown nor Singleton returned calls this week, but they’ve told others that they want AMC to be the surviving company if any mergers take place.

Just last year, leveraged buyout companies were snapping up theater companies large and small. But the ardor of outside investors has cooled, as some buyout firms have been disappointed by their meager returns.

Creating an additional chill is a U.S. Justice Department probe begun eight months ago into potential antitrust problems created by the last wave of consolidation among movie exhibitors.

For better or worse, AMC may remain independent, just as its colorful founder apparently wished.

Kathryn Harris is a columnist with Bloomberg News.

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