Westinghouse Broadcasting and Cable Inc. said yesterday it will pay $313 million to acquire a Los Angeles independent television station owned by RKO General Inc. -- with $95 million of the price going to a group that has agreed to drop its own bid for the station.
Wall Street sources said yesterday that the agreement to pay Fidelity Television Inc. to back away from its bid for the station is "unprecedented." Fidelity, a privately held Los Angeles company with no material assets, has been in a costly legal battle for control of RKO's television station license for 20 years, challenging RKO's fitness as broadcaster.
Under terms of the unusual agreement announced yesterday, RKO would receive about $218 million from Westinghouse in return for the assets of KHJ-TV, Channel 9. RKO also would withdraw its request to the Federal Communications Commission for renewal of the license needed to operate the Los Angeles station.
After RKO withdraws its license renewal request, Fidelity Television is expected to be granted control of the license by the FCC. Fidelity, which would never operate the station, would then be acquired for $95 million by Westinghouse, giving Westinghouse control of the station and the license, if the deal receives FCC approval.
William G. Simon, a former special agent in charge of the FBI's Los Angeles division, is president of Fidelity Television Inc.
Although it would be acquiring a station that has a weak market share, investment bankers said Westinghouse would be entering the lucrative Los Angeles television market for far less money than Chicago's Tribune Co., which earlier this year agreed to acquire Los Angeles independent television station KTLA-TV for $510 million. For Westinghouse, which is in the process of selling $2 billion of cable television properties, the deal indicates the company's continued commitment to broadcasting.
"The acquisition says we are committed to broadcasting, and it increases our penetration of the U.S. market from 10 percent to 15 percent," said Daniel L. Ritchie, president of Westinghouse Broadcasting and Cable, also known as Group W. "I think this is an opportunity for us to do some experimenting in local programming," Ritchie said, noting that the five television stations already owned by Westinghouse are network affiliates that receive most of their programming from the networks.
In addition to Baltimore's WJZ-TV, Channel 13, and Home Team Sports, a cable sports channel serving the Washington-Baltimore area, Westinghouse owns television stations in Boston, Philadelphia, Pittsburgh and San Francisco.
Ritchie said Westinghouse is interested in acquiring additional television stations and may bid on RKO's WOR-TV, Channel 9, an independent television station serving the New York area that RKO put up for sale yesterday. Once RKO sells that station, RKO's only remaining television station will be in Memphis. The company lost control of a Boston station in 1980 as a result of charges that it was morally unfit to hold the license.
RKO is a subsidiary of GenCorp Inc., the Akron, Ohio-based company that makes tires, rocket engines and tennis balls. GenCorp is a successor to the General Tire and Rubber Co., which achieved notoriety in the late 1970s by admitting to activities including maintaining an illegal slush fund and making political payoffs here and abroad.