TV Group Owner Gillett Trying to Sell 5 Stations
George N. Gillett Jr., who has assembled the nation’s largest group of television stations over the past several years, has fallen short of his earnings projections and has begun looking for buyers for some of his firm’s 12 properties, industry officials say.
Gillett has been talking to potential buyers for several weeks about five of the stations: KCST-TV in San Diego, WJBK-TV in Detroit, WJW-TV in Cleveland, WMAR-TV in Baltimore and WOKR-TV in Rochester, N.Y. More recently, Gillett has suggested to prospective buyers that he would entertain offers for almost any of the stations in his Nashville, Tenn.-based chain, industry sources say.
For the record:
12:00 a.m. Aug. 10, 1988 FOR THE RECORD
Los Angeles Times Wednesday August 10, 1988 Home Edition Business Part 4 Page 2 Column 2 Financial Desk 2 inches; 70 words Type of Material: Correction
In a July 29 story and table regarding TV station owner George Gillett, several figures were incorrect. Gillett bought his stake in six stations of the former Storer Communications for $650 million, not $600 million. Of his firm’s capitalization, Drexel Burnham Lambert raised $400 million in high-yield debt, not $550 million. In the table, based on average daily household reach in each market, WMAR in Baltimore should have been ranked No. 1; WOKR in Rochester, N.Y., No. 2, and WJBK in Detroit, No. 3.
Gillett rose suddenly to prominence last year as he paid $1.26 billion for 12 major-market television stations. In the largest single transaction, he paid about $600 million for a 51% interest in the six stations of the former Storer Communications chain. The leveraged buyout firm Kohlberg Kravis Roberts & Co. owns the other 49%.
In addition to the San Diego station, the entrepreneur’s holdings include two smaller California stations: KSBY-TV, San Luis Obispo-Santa Barbara, and KSBW-TV, Salinas-Monterey.
The purchases drew wide comment on Gillett’s heavy indebtedness, but the entrepreneur insisted that he could cut the stations’ costs, improve their ratings and boost profits enough to justify the high prices.
Gillett this week declined to comment on the possible sales, but word of his interest has set off many--and contradictory--rumors about his intentions and the company’s financial condition. Some in the industry speculate that Gillett intends to sell most of the chain and invest the proceeds in another business, while others contend he will sell only two or three stations to service debts that are soon to come due.
A knowledgeable source said Gillett has fallen about 15% short of his goals for operating cash flow--that is, profit from operations plus depreciation. The shortfall has put him under pressure from his leading bankers, First National Bank of Chicago and Bankers Trust Co., to raise cash, the source said.
“They had a hard time putting this (loan) syndication together in the first place, and they don’t want any more risk,” said this source.
Neither of the banks, which head a consortium of lenders owed more than $500 million, would comment. Gillett’s total capitalization of $1.22 billion also includes $550 million raised through the sale of high-yield “junk bonds” by the investment firm Drexel Burnham Lambert.
Among those who have at least talked to Gillett are Group W Television, a unit of Westinghouse Electric; King World, a television syndicator; CBS Inc.; Meredith Corp., a publisher and broadcaster, and Terry Lee, formerly an executive with the Storer broadcast chain. None of those parties would comment.
Price Is Obstacle
King World and Group W Television have both indicated an interest in buying more television stations, and each has enough cash to buy a number of the stations if they wished. Group W has shown an interest in the San Diego and Detroit stations.
But Gillett’s high asking prices have so far been an obstacle. Gillett’s $285-million opening price for the Baltimore station compares, for example, to the $212 million that he paid for the station and a far smaller non-network station in Richmond, Va., when he purchased the pair from Times Mirror Co. in 1986.
Industry officials believe that Gillett may well sell the stations at high prices and earn back more than his investment. But they say divestiture of a large portion of the chain would nonetheless be a setback for Gillett, who dreamed of turning around the underperforming Storer properties and building a model broadcast chain.
With a controlling interest in 12 properties, Gillett owns as many stations as one party may hold under the rules of the Federal Communications Commission. In addition, last year he put five other stations into a trust for his children. The chain is called Busse Broadcast Communications for the former associate who manages it.
The FCC accepted Gillett’s contention that he would have no control over those stations, despite skepticism from others in the industry.
One of the Busse stations, WRLH-TV in Richmond, Va., was recently sold to Act III Communications, a broadcast firm controlled by TV producer Norman Lear.
GILLETT’S TV EMPIRE
Station Average Daily Rank in (Network Affiliate) City Household Reach Market GILLETT HOLDINGS INC. WMAR (NBC) Baltimore 658,200 2 WSMV (NBC) Nashville 478,500 1 WOKR (ABC) Rochester, N.Y. 217,400 3 KSBW (NBC) Salinas 156,000 1 KSBY (NBC) San Luis Obispo 76,400 2 SCI TELEVISION INC. * WJBK (CBS) Detroit 876,500 4 WJW (CBS) Cleveland 805,900 3 WAGA (CBS) Atlanta 676,400 3 WSBK (Ind.) Boston 619,100 4 WITI (CBS) Milwaukee 378,900 3 KCST (NBC) San Diego 366,600 3 BUSSE BROADCAST COMMUNICATIONS ** WWMT (CBS) Kalamazoo, Mich. 291,900 2 KOLN-KGIN (CBS) Lincoln-Hastings, Neb. 187,900 1 WEAU (NBC) Eau Claire, Wis. 131,800 1 KOKH (Ind.) Oklahoma City 122,900 4 OTHER *** WTVT (CBS) Tampa 720,800 1
* Co-owner with KKR ** Gillett children’s trust *** Co-owner with Clarence V. McKee
Sources: Broadcasting Yearbook 1988; Arbitron Ratings Co.; Channels magazine