Thomas S. Murphy, who as chairman and chief executive of Capital Cities Communications stunned Wall Street in 1985 by acquiring the much larger American Broadcasting Company for $3.5 billion, then 10 years later startled Wall Street again by selling the resultant company to Disney for $19 billion, died on Wednesday at his home in Rye, N.Y. He was 96.
His death was announced by Patricia J. Matson, a former senior vice president of communications at Capital Cities and a spokeswoman for Mr. Murphy.
Mr. Murphy’s business success can be summed up in a single statistic: Capital Cities stock increased in value 2,000 times between 1957, when the company first sold stock to the public, and 1995, when Disney bought it.
Other measures underline the same story. In the three decades before Capital Cities acquired ABC — a company four times its worth — it had swallowed three dozen broadcasting and publishing companies, almost always at bargain-basement prices. Its television stations made $55 in profit for every $100 they took in. Its earnings per share increased by 22 percent annually from 1974 to 1985, as investors responded with what Fortune magazine called “almost reverential confidence in the management.”
For Warren E. Buffett, the celebrated Omaha investor, much of this success flowed from one man, Mr. Murphy, who was described as affable as often as he was called shrewd.
“He has none of those complexities of character that screw other people up and make for irrational behavior,” Mr. Buffett told The New York Times in 1987.
Perhaps because Mr. Murphy and his chief lieutenant, Daniel B. Burke, the president of Capital Cities, came from the broadcasting world, they were generally seen to have proceeded more smoothly in their acquisition than those who followed: In 1986, General Electric acquired NBC’s parent, RCA, and Laurence A. Tisch’s Loews Corporation acquired a controlling interest in CBS.
The network’s ratings increased, including those for ABC News. ABC also made inroads with the younger audiences more attractive to advertisers.
“I wouldn’t say I was a creative force,” Mr. Murphy said in 2017. “But I still think I know what makes me cry and what makes me laugh.”
Mr. Murphy may have won praise for his jovial “hey, pal” demeanor, but he did not shrink from the momentous. In December 1984, he strode into the office of Leonard H. Goldenson, the founding chairman of ABC, who had run the company for more than three decades. He said he had an idea and hoped Mr. Goldenson would not throw him out of the 39th-floor window when he heard it. He suggested Capital Cities acquire ABC.
Mr. Murphy, left, in 1991 with his longtime chief lieutenant, Daniel B. Burke, who was president and chief operating officer of Capital Cities from 1972 to 1989.Credit…ABC Photo Archives/Disney General Entertainment Content via Getty Images
He argued that it made sense for both sides. Mr. Murphy coveted the local stations ABC owned, and a change in federal policy had made it possible for a company to own more stations. For his part, Mr. Goldenson wanted the management expertise that he did not think his own company had to guide it into the future. And Mr. Buffett called Capital Cities the most well-managed company anywhere.
After haggling over price, Capital Cities acquired ABC for $3.5 billion. At the time the deal, which one writer likened to a minnow swallowing a whale, was the biggest merger ever outside the oil industry.
In 1995, Mr. Murphy helped put together what was then the second-largest corporate takeover ever (after Kohlberg Kravis Roberts’s acquisition of RJR Nabisco in 1989): the sale of what had become Capital Cities/ABC to Disney. That deal brought together Disney’s vast media and entertainment kingdom with Capital Cities/ABC’s own sprawling assets, which included increasingly valuable cable properties like ESPN. Disney paid Capital Cities shareholders $19 billion.
Mr. Murphy’s beginnings in business were humble. After graduating from Harvard Business School in 1949, he worked for an advertising agency and as a brand manager for Lever Brothers. An investment group headed by Lowell Thomas, the broadcaster and author, and Frank Smith, Mr. Thomas’s manager and partner, asked him to manage an AM radio station and a UHF television station it had bought in Albany, N.Y. Mr. Smith called the venture “a crapshoot,” but Mr. Murphy was eager to run something — even, he later said, a plumbing business. He took the job, which paid $18,000 a year.
Mr. Smith became chairman and chief executive of Hudson Valley Broadcasting, which owned the stations, with Mr. Murphy as chief operating officer. The stations were so small that they broadcast out of a home for retired nuns. The company almost went bankrupt — twice.
But by 1957, the television station had moved to the more powerful VHF frequency, and Hudson had merged with a television station in Durham, N.C., to become Capital Cities. (The stations served the capital regions of their respective states.) In 1957, shares of the new company were sold to the public for 72 cents each.
Mr. Smith died in 1966, and Mr. Murphy became chairman and chief executive. He set up a decentralized management structure to force lower-level executives to make their own decisions. His passion for cost-cutting became well known: He painted only the two sides of the company headquarters that faced the road, and the building had no air-conditioning.
The business grew rapidly. Costs were largely fixed, so continuing increases in sales or decreases in costs widened profit margins. Capital Cities poured its returns into acquisitions rather than dividends; at the time of the ABC acquisition, it had seven television stations, 12 radio stations, 54 cable television stations, 10 daily newspapers and 36 specialty newspapers and shopping guides.
Mr. Murphy put the deals together. Mr. Burke, as president, ran the ever more complex operations, usually away from public view.
Mr. Burke succeeded Mr. Murphy as chief executive in 1990, but Mr. Murphy got the job back in 1994 when Mr. Burke retired. Mr. Murphy retired in 1996. Mr. Burke died in 2011.
Mr. Murphy, right, with Michael Eisner, the chairman and chief executive of Disney, in 1995, when Disney’s deal to buy Capital Cities was announced. At the time, it was the second-largest corporate takeover ever.Credit…Allan Tannenbaum/Getty Images
Thomas Sawyer Murphy was born in Brooklyn on May 31, 1925. His father, Charles, was active in Democratic Party politics and was a judge in New York State courts for the last 15 years of his life. In his 1995 book, “Buffett: The Making of an American Capitalist,” Roger Lowenstein wrote that Mr. Murphy’s mother, Elizabeth (Sawyer) Murphy, often touched his chest and declared, “Tommy, you’re the best!”
Mr. Murphy started college at Princeton but left to join the Navy, serving from 1943 to 1946. The Navy sent him to Cornell, where he earned an undergraduate degree in mechanical engineering. He applied to Harvard Business School but was rejected and worked as an oil salesman for Texaco for a year. He later applied to Harvard again and was accepted. He graduated in 1949.
He met Mr. Buffett in the early 1970s, and Mr. Buffett bought 3 percent of Capital Cities. After the price went up, Mr. Buffett sold the stock, that way missing the huge increases in share prices to come.
“Temporary insanity,” Mr. Buffett later said of his decision to sell.
Mr. Lowenstein wrote that Mr. Murphy began checking with Mr. Buffett before making many of his bigger business decisions. The two once proposed buying Walter Annenberg’s publishing empire, which included The Philadelphia Inquirer and TV Guide, on a 50-50 basis for $1 billion. Mr. Annenberg declined to sell.
When Mr. Murphy bought ABC, Mr. Buffett volunteered to buy three million shares, or 18 percent, of Capital Cities stock, as a defensive measure to help Mr. Murphy fight any hostile takeover attempts. Mr. Buffett authorized Mr. Murphy to decide how to vote his shares. (Mr. Buffett also hoped to make money on the investment, which he did.)
Mr. Murphy’s wife, Suzanne (Crosby) Murphy, died in 2009. He is survived by three daughters, Emilie Murphy, Kathleen Murphy and Mary Conlin; a son, Thomas S. Murphy Jr.; and nine grandchildren. A brother, Charlie, and a sister, Betty Murphy Orteig, died before him.
Mr. Murphy liked to brag that he never went to work. In an interview for Harvard Business School, he said: “I just loved fixing things, or figuring out how to make deals and things like that, and I couldn’t wait to get to the office in the morning. So I never went to work. Not many people can say that. It’s an unbelievable luxury to be able to say something like that.”
Maia Coleman contributed reporting.