Lorimar-Telepictures Corp. said yesterday that it has agreed to acquire seven television stations from the investment firm of Kohlberg, Kravis, Roberts & Co. for about $1.85 billion.
The proposed acquisition would mark another joining of a movie and TV-program producer with a TV-station or cable group. It also would mark the partial liquidation of Storer Communications Inc., a cable TV and broadcasting company based in Miami and acquired only last December by Kohlberg Kravis in a leveraged buyout valued at about $2.5 billion.
In a leveraged buyout, the buyer takes on debt to acquire a company, then uses the company's earnings or sales of its assets to pay off the debt.
Lorimar-Telepictures, which is based in Culver City, Calif., was formed last February with the merger of Lorimar Inc., best known for its TV series "Dallas," with Telepictures Corp., a TV-program producer and syndicator and owner of five TV stations.
Before that merger, Lorimar signaled its desire to acquire TV stations when it made an unsuccessful effort last April to acquire Multimedia Inc. for $1 billion.
With the planned acquisition of the Kohlberg Kravis stations, Lorimar-Telepictures is going after stations in large markets, giving a sizable, captive base for syndicating its own movies or TV programs. The seven stations collectively reach almost 10 percent of the nation's total TV audience.
The six Storer stations to be acquired are WAGA in Atlanta, WJKW in Cleveland, WJBK in Detroit, WITI in Milwaukee, all of which are CBS affiliates; KCST in San Diego, an NBC affiliate; and WSBK in Boston, an independent.
Also being acquired are Storer's program production and advertising sales units and its Washington news bureau. The price for all the Storer properties is about $1.45 billion.
For about $405 million, Lorimar-Telepictures also plans to buy WTVJ, a CBS affiliate in Miami, and some downtown Miami real estate from Kohlberg Kravis' Wometco Broadcasting Inc., a company it also acquired in a leveraged buyout.
Before its buyout last year, Storer rejected a proposal by some shareholders for a liquidation and vowed that it wouldn't be dismembered. However, the proposed sale to Lorimar-Telepictures would leave Storer with only a station in Toledo, and it seems unlikely that station will be retained for long.
Storer continues as a major cable operator, ranking fourth nationwide with a total base of about 1.5 million subscribers. However, with cable systems bringing prices up to $1,500 a subscriber or more, the Storer systems might be worth more than $2 billion.
A new company will be created by Lorimar-Telepictures to hold the properties being acquired. Seventy-five percent of the stock in the new company will be distributed to Lorimar-Telepictures shareholders as a dividend. The other 25 percent will be held by institutional investors who will be putting up about $500 million in cash to finance the deal, said Michael Garin, a member of Lorimar-Telepictures' Office of the President.
Lorimar-Telepictures' performance would be rated on the company's earnings, while the new TV group would be rated on its asset appreciation, Garin said. That arrangement will avoid diluting Lorimar-Telepictures' balance sheet and should improve earnings through management fees. Garin said that arrangement also "avoids the difficulties of trying to combine two very different types of companies."
The deal is expected to be completed early next year.