Talk:Storer Broadcasting
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Why were the Storer television stations bought out by KKR?
Storer had become highly leveraged due to its building of all the cable franchises it had won. The result was the stock was under valued (trading in the $25 range - NYSE- SBK) and it became a target for the Conniston Partners:
From the New York Times--------------------------------------------------------
Storer Disputes Election Tally
Published: May 29, 1985
Storer Communications Inc. said that a dissident group of shareholders with a 5.29 percent stake in the company had won as many as four seats on its nine-member board.
The Miami-based broadcasting company said, however, that it was disputing some of the votes from its annual meeting and it predicted that a proper tabulation would result in the election of just three of the dissidents.
The company said it filed suit Friday in an Ohio state court and obtained an order barring the dissident nominees from assuming office. It said it had also asked the court to order a recount.
The dissident group, headed by the Conniston Partners, said it had filed a petition in Federal court in Cleveland to revoke the lower court's action.
Storer said its annual meeting was tentatively scheduled to resume at its Miami headquarters today pending a resolution of the election dispute.
Conniston has said that Storer has a liquidation value of between $90 and $100 a share.
While this lawsuit was pending, Peter Storer decided to take the company private, in effect dissolving the Board and removing the threat from the Conniston Partners to liquidate the company. In order to buy back the stock from every stock holder, KKR had to raise singinficant funds and did this through a popular financing vehicle of the 1980's, the "junk bond":
From Merchants of Death: KKR and the Mortgaging of American Business by George Anders
Drexel's tremendous financial clout was crucial to KKR. Storer Communications, an operator of television stations and cable-TV networks, was being pursued by corporate raiders {Conniston Partners}. The management, under Peter Storer, sought an alternative. KKR was encouraged to bid. In bidding to buy Storer Communications KKR had borrowed all it could, including a $1.2 billion junk bond issue marketed by Drexel, to put together a $2.5 billion offer. But KKR's offer included $255 million of preferred stock that the shareholders would have to take as part of the purchase price. The board of directors of Storer objected to the preferred stock and KKR at the last minute had to come up with $255 million in cash. George Roberts visited Drexel and Milken quickly agreed to purchase the $255 miilion of preferred stock. KKR won the bidding for Storer thanks to the quick help of Milken. Drexel received $55 million in underwriting and advising fees, but KKR was quite willing to pay such fees in return for such effective help.
After the stock was repurchased, KKR in effect controlled the company and instead of allowing it to continue normal operations (what Peter Storer had been led to believe) it quickly put the company on the block. Peter was "retired" from running the company and an interim management group was created to manage the sale of the assets.
