Directors of Time Inc. voted approval "in principle" yesterday of the billion-dollar communications firm's $20 million purchase of The Washington Star, with final details still to be negotiated. A closing date on the sale has not been set yet.
At the same time, the Federal Communications Commission voted 6-0 to reconsider its previous approval for Washington Star Communications Inc. to swap WJLA-TV (Channel 7) here for an Oklahoma City station. The action will permit the commissioners to study "new facts" related to the sale of The Star to Time.
Under a timetable approved by the FCC, a contract between Washington Star Communications and Combined Communications Corp., of Phoenix, for an exchange of TV stations and $55 million in combined stock to Star owner Joe L. Allbritton, still could be completed as scheduled by the end of
By their comments yesterday, a majority of FCC members indicated they still expect to vote in favor of the exchange at a Feb. 24 meeting.
Commission Chairman Charles D. Ferris, who voted with the majority in a 5-2 approval of the sale last month, said it "is valid to raise questions" about circumstances of The Star's proposed sale to Time. But, he added, "I probably would reach the same conclusions on the merits."
A Time spokesman said the FCC's action will have no effect on the proposed acquisition. "I believe this has no bearing whatever on our acquisition of The Star," the Time official said.
However, the questions to be sumitted to Washington Star Communications by the FCC - with responses required by next Tuesday - deal with the proposed Time takeover of The Star.
One question asked by Commissioner James H. Quello, for example, was: "To what extent, if any, should we concerned with the time frame in which we granted the waiver [of station ownership limitations], then shortly after, the sale of The Star was announced?"
Initial FCC approval of the exchange of WJLA for KOCO-TV in Oklahoma City came on Jan. 12. several members noted in favor of the transaction because of a desire to save The Star - even though FCC guidelines on combined's ownership concentration were violated by the decision.
Allbritton announced the proposed sale of The Star to Time Inc., in the newspaper's editions of Feb. 3. FCC staff members said yesterday that the only notification of the proposed newspaper sale they received were oral and written communications on Feb. 2, from Allbritton's company.
Following the Time board action in New York yesterday, accountants for the communications firm will now go through the books of The Star, in what a Time spokesman said was "a normal, pudent procedure" on an acquisition, to see if the paper's financial situation has been represented accurately.
Exactly 10 years ago, Time announced it was purchasing the Newark Evening News, then the largest paper in New Jersey. But the deal fell apart a month later when examination of the newspaper's books revealed unexpected financial problems. The Newark paper eventually ceased publication.
Time officials did not disclose what details still must be hammered out in final negotiations with Allbritton. A spokesman for the Star Communications chairman also declined comment on contract talks. One source said, however, that Allbritton's personal contract with Time has yet to be negotiated.
Washington Star Communications' board is scheduled to meet today and is expected to ratify the sale to Time Inc. Steve Richard, the spokesman for Allbritton, said he knew of no problems associated with the Time agreement and forecast that the sale would be closed "in a few weeks, I can't say exactly."
Earlier, Allbritton had said he hoped to consummate the Time agreement by next weekend. The Star chairman has said he will remain as the newpaper's publisher for five years.
Richard also said that Washington Star Communications would comply with yesterday's FCC order and deliver answers to the agency's questions by Tuesday.
Richard and a spokesman for Combined Communications, chief counsel Lawrence R. Wilson, both said yesterday that their agreement has not been changed by the FCC decision. They still expect to complete the exchange by Feb. 28, if the FCC once again approves the deal on Feb. 24 - the final day by which final agency approval is required in the contract.
Wilson said he had not talked with Washington Star representatives, but said he had no reason to believe that the proposed television swap was jeopardized by the FCC decision.
The sale of WJLA to Combined Communications, a deal under which Allbritton would gain ownership of the Oklahoma City station and $55 million of non-voting stock in Combined has been estimated to have a total value of $100 million - the largest in broadcast history.
Several Washington citizens groups opposed the sale, charging that Allbritton failed to live up to an agreement to seek minority owners for WJLA and that by permitting Combined to buy WJLA, the deal gave the firm too large a share of large metropolitan markets in violation of FCC policy.
Yesterday's FCC action mooted a request by the citizens groups that the earlier WJLA approval by stayed, pending a court appeal. A spokemsman for the Citizens Communications Center, which is representing four groups who oppose the sale, said no decision had been made last night on future strategy.
The FCC, meantime, defeated on a 3-3 vote a proposal that the commission consider the citizens' complaints as part of its review next week.
Commissioner Joseph R. Fogarty asked his colleagues to seek answers to other questions about the Combined Communications Washington Star sale - who requested the meeting, where the sale first was proposed, and what were the contents of a letter to Combined last March 24, dealing with the potential sale of JWLA.
Chairman Ferris and Commissioner Tyrone Brown supported Forgarty, who said the record "raises substantial and material questions of fact" about whether minority interests were offered a chance to buy WJLA. In the time vote, Commissioners Quello, Abbott M. Washburn and Margita E. White voted against Fogarty's proposal. Commissioner Robert E. Lee was absent, but other colleagues said he would have voted against Fogarty.
Quello, who proposed that the FCC reconsider its earlier WJLA transfer, said Time's takeover of The Star "substantially changed" the facts upon which the agency's action was based - since the transaction had been characterized as providing needed cash flow to fund The Star.
"Is there any other factor" to justify the FCC's approval of the exchange, he asked. He also raised a question about future ownership of WJLA if the Combined Communications deal is called off. Specifically, Quello said he wants to know if Allbritton's continuation as Star publisher would constitute "control" of the paper, and thus prevent him from also owning WJLA.
FCC staff members told the commissioners that based on information they now have, they know of no reason not to continue to support the exchange. They said if the exchange is cancelled, Allbritton would have to seek a waiver of FCC rules to be both Star publisher and WJLA owner.
TIme Inc., meanwhile, announced that profits of the diversified communications and forest products company reached a record $90.5 million ($4.44 a share) in 1977, up 35 percent from year before when net income totaled $67.1 million ($3.32). Revenues increased 20 percent to $1.25 billion.
The company's magazine and book publishing divisions accounted for $99.6 million or 63 percent of its pretax earnings on $718.1 million in revenues.
Aggregate earnings of Time Inc.'s magazines - Time, Sports Illustrated, People. Fortune and Money - set a record in 1977, the company said, but the firm did not break out the income figures. Advertising revenues rose 27 percent to $274 million, while circulation revenues climbed 25 percent to $183 million.
The book division also had record results, led by Alexandria-based Time-Life Books' 11 percent gain in revenues to $215 million, nearly half of which were generated by international operations. The company attributed part of the earnings gain at Time-Life Books to "various savings stemming from its relocation to Alexandria."
Little, Brown and Co., another publishing subsidiary, also had record earnings and revenues. Time Inc. bought Book-of-the-Month Club, Inc. last November, so only the December results of this new subsidiary were included in the company's 1977 financial report.
The forest products operations of Temple-Eastex Inc. benefited from a strong home building materials market, offsetting reduced profits from pulp and paperboard,
Also contributing to this story was Washington Post staff writer Bill McAllister.