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overview
landmarks
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overview
This profile considers Storer, Wometco and Gillett, broadcast
and cable tv operators whose assets have been absorbed
by TCI, Comcast
and Murdoch.
It covers –
introduction
The history of Storer, Wometco and Gillett reflects the
trajectory of US broadcasting conglomerates (eg the fate
of NBC-RCA, CBS,
Westinghouse and Cooke)
and the vicissitudes of groups whose expansion was based
on large-scale borrowing from banks or on junk bonds.
Difficulties with junk finance are evident in the collapse
of Ralph Ingersoll's newspaper
group - absorbed by the Journal Register - and the underwhelming
performance of Primedia, the
magazine group created by junk-bond vendor Kohlberg Kravis
Roberts (KKR).
Wometco
Wometco was founded in 1926 as Wolfson-Meyers Theater
Co. It expanded from cinema operation in the US South
East and Caribbean into property development, vending
machines, billboards, bottling (eg Pepsi and Coca-Cola
franches) and television stations. In 1960 it acquired
the Miami Seaquarium; during the seventies it moved into
cable television.
In 1984 it succumbed to a takeover under the auspices
of KKR. Mitchell Wolfson, heir of one of the founders,
emulated James Fairfax by spending the proceeds on art
- establishing the South's preeminent decorative arts
museum.
Wometco's broadcast and cable operations were offloaded
by KKR; bottling and other operations went to different
buyers, with the name and some entertainment assets subsequently
being sold to Wometco management.
Storer
Storer was founded in Ohio during 1927 as Storer Broadcasting,
Inc. It leveraged success in non-metropolitan radio broadcasting
to build a chain of television stations, beginning with
three of the licenses (WJBK, WAGA and WSPD) granted by
the FCC before its 1948 'freeze' in 1948.
By 1961 Storer was the nation's sixth-largest tv broadcaster
- exceeded in size only by the three networks (ABC, CBS,
and NBC), Metropolitan Broadcasting (later Metromedia)
and Westinghouse.
In 1965 Storer acquired a controlling stake in the Boston
Gardens sports arena and 55% of Northeast Airlines (launched
in 1933 as Central Vermont Airways under the ownship of
the Central Vermont Railroad company). Northeast had been
acquired by former RKO owner Howard
Hughes, then owner of TWA, in 1962.
Hughes declined to support the loss-making Northeast after
disagreements with the US Civil Aviation Board, transferring
his interests to a trustee. The trustee sold the Hughes
stake (which included a US$23 million loan) to Storer,
which was flush with cash and faced regulatory constraints
on expanding its television broadcasting interests.
Relaxation of those constraints and poor performance by
the airline saw Storer offload Northeast in 1972 by merging
the line with Delta Airlines. It progressively sold its
radio stations, investing the proceeds in cable television.
In contrast to competitors such as TCI, Storer tended
to acquire franchises and build cable sytems rather than
buy existing operations.
In 1983 the group's name was changed to Storer Communications
(SCI). At that time it owned and operated seven television
stations (inc WJBK Detroit, WJW Cleveland, WITI Milwaukee,
WAGA Atlanta
and WSPD Toledo), with franchises to provide cable service
to over 500 communities in 18 US states.
Storer's market price significantly lagged the cost of
its assets and the group succumbed to a US$2.43 billion
takeover under the auspices of KKR and George Gillett.
Key stations were sold to Murdoch's
News in 1997 (after acquisition by New World Communications
following a crisis in 1992), building the Fox Network.
Gillett
George Gillett moved from McKinsey to become business
manager and part-owner of the Miami Dolphins. He invested
in the Harlem Globetrotters in 1967 in association with
John Kluge. In 1978 he acquired
Packerland Packing, a major US meat processor, and launched
Gillett Communications by buying three small television
stations. Three years later he bought the WSM television
station in Nashville.
In 1984 Gillett acquired Post Corporation's eight television
stations, 22 newspapers and associated plant; the non-broadcast
assets were sold to Thomson
and other buyers. In the following year he acquired Vail
Associates' Vail and Beaver Creek ski resorts, going on
to acquire Storer in 1987, using KKR paper, after the
FCC lifted restrictions on ownership.
The group melted down in 1992 as higher interest rates
penalised junk bond issuers. Gillett's media arm was reorganised
as New World Communications under the control of Ronald
Perelman.
Gillett recovered enough to repurchase Packerland in 1995.
In 1996 he formed Booth Creek Ski Holdings Inc., acquiring
or building a range of ski resorts in New Hampshire, California,
Washington and Wyoming. From 1997 he extended his meat
interests by building Corporate Brand Foods America (which
included Iowa Ham, Jordan Meats and Wright Bacon). Those
interests were acquired by Iowa Beef Processors for US$550
million.
Gillett and Hicks
Muse Tate & Furst (parent of LIN
TV and Capstar) bought ConAgra's
beef operations - Swift & Co - for US$1.4 billion
in 2001. During the preceding year he'd bought 80% of
the Montreal Canadiens hockey team and Molson arena for
US$185 million.
Perelman and New World Communications
Ronald Perelman gained an MBA from the Wharton School
in 1966 and in 1978 borrowed US$1.9 million to buy about
a third of a jewelery distributor and retailer, the same
mechanism used by Christopher Skase
as the basis of Qintex in the 1980s.
In 1980 he acquired MacAndrews & Forbes for US$45
million, using US$33 million in junk bonds in an unsuccessful
bid for toymaker Milton Bradley. Perelman had more success
with bids for Consolidated Cigars, Movie Labs and Video
Corporation of America using US$140 million junk bonds
marketed by Drexel Burnham. Technicolor, acquired in 1983
for US$105 million, was rationalized before sale to UK
media group Carlton in 1988.
Perelman took MacAndrews & Forbes private in an LBO
using US$95 million bonds from Drexel Burnham. In 1985
he acquired 38% of grocery chain Pantry Pride for US$60
million. Pantry Pride subsequently acquired Revlon for
around US$2 billion in cash and assumption of some US$1
billion debt, recouped by sale of Revlon's health care
operations for US$1.4 billion. In 1987 it spent US$500
million to buy cosmetics firms such as Max Factor.
Perelman's New World Entertainment acquired the Marvel
comics group, subsequently sold to the entrepreneur for
US$82 million before being floated. At its peak Marvel's
market value was around US$3 billion but Perelman lost
control in 1996 - amid an unpleasant dispute with fellow
raider Carl Icahn - when Marvel succumbed to debt from
the LBO and injudicious expansion. Perelman is, however,
alleged to have received over US$280 million during the
course of his involvement with Marvel.
New World acquired the Storer-Gillett broadcast interests
- rebadged as New World Communications - as part of reorganisation
after 1992. Rupert Murdoch's News group paid US$500 million
for a 20% stake in New World Communications and affiliate
agreements from its 12 current network affiliates. In
1997 News bought the remaining 80%.
studies
There has been no major study of Wometco, Storer or Gillett.
For KKR see Connie Bruck's The Predators' Ball: The
Inside Story of Drexel Burnham & the Rise of the Junk
Bond Raiders (New York: Penguin 1989) and Barbarians
at the Gate: The Fall of RJR Nabisco (New York: HarperBusiness
1991) by Bryan Burrough & John Helyar.
The New Financial Capitalists: Kohlberg Kravis Roberts
and the Creation of Corporate Value (Cambridge: Cambridge
Uni Press 1998) by George Baker & George Smith is
an authorised, laudatory and - to us - unconvincing, study.
It might be read in conjunction with George Anders' Merchants
of Debt: KKR and the Mortgaging of American Business
(New York: Basic Books 1992), superior to Sarah Bartlett's
The Money Machine: How KKR Manufactured Power &
Profits (New York: Warner 1991).
For Perelman as an asset stripper and raider see Bruck,
Den of Thieves (New York: Touchstone 1991) by
James Stewart and glitzy Testosterone, Inc - Tales
of CEOs Gone Wild (New York: Simon & Schuster
2005) by Christopher Byron. Insights are offered by Dan
Raviv's Comic Wars: How Two Tycoons Battled Over The
Marvel Comics Empire And Both Lost (New York: Broadway
2002) and by Rita Ricardo-Campbell's Resisting Hostile
Takeovers - The Case of Gillette (New York: Praeger
1997).
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