Aborted Buyout of KHJ May Still Bring a Windfall : Despite Westinghouse Exit, Local Investors Might Obtain, Resell License

Westinghouse Electric’s decision not to purchase KHJ-TV Channel 9 in Los Angeles from Gencorp may bring a windfall worth hundreds of millions of dollars for a group of prominent Southern California investors who have fought for 22 years to win the station’s license, industry officials say.

Fidelity Television, the investor group, was included in the deal by which Gencorp’s RKO General subsidiary would have sold KHJ to Westinghouse. RKO was to get $212 million and Fidelity would have netted $95 million. Under the deal, RKO would have transferred the station’s license to Fidelity, which in turn would have sold it to Westinghouse.

But Westinghouse’s withdrawal last week may have renewed a 22-year-old feud between RKO and Fidelity, which would have been ended by the sale.

On Friday, Gencorp said that Fidelity had not joined an effort to seek a new buyer for the station, although several companies have expressed interest.

Hopes of Winning License

Some industry officials say Fidelity may be declining to participate in hopes that it will win KHJ’s broadcast license in upcoming proceedings before the Federal Communications Commission regarding renewal of RKO’s license.

They note that Gencorp, which has defended itself against a variety of misconduct charges for more than a decade, in 1982 lost a broadcast license for WNAC-TV, Boston, to a similar investor group, New England Television.

If Fidelity were to win the license for Channel 9, it could operate the station or--perhaps more likely--resell it for nearly as much as Westinghouse offered, observers say.

Fidelity Television “may be waiting to see if RKO loses the license to them,” said David Schutz, an investment banker with Comcapital Group in New York, “That would be completely reasonable.”

Among Fidelity’s 54 investors are attorney William G. Simon, former head of the FBI’s Los Angeles office; restaurateur Maude Chasen; former U.S. Rep. George Danielson of Monterey Park, and Mervyn LeRoy, the producer.

Made No Headway

On Friday, Gencorp Chairman and Chief Executive A. W. Reynolds said in a statement that Gencorp had made no headway in trying to sell the station because Fidelity had not been willing to discuss terms under which the two might approach a new buyer.

“The issue is whether Fidelity desires to pursue again a settlement similar to the Westinghouse agreement . . . and how Fidelity and RKO would divide proceeds of the sale,” said Reynolds, whose Akron-based company manufactures tires and aerospace products and bottles soft drinks.

Fidelity’s cooperation is necessary because presumably no sale could take place as long as the investor group opposed it before the FCC.

Simon, who organized Fidelity, said the group was “considering what options we have . . . I don’t want to speculate in any way.”

The FCC’s decision on renewal of RKO’s license may be several years away. Questions about RKO’s fitness to hold such licenses first arose in 1965 when Fidelity questioned the quality of RKO programming; since then, dozens of groups have challenged 14 RKO radio and television licenses, arguing that the company is not fit to hold them because it failed to disclose questionable overseas payments and illegal campaign contributions.

Better Use for Money

Westinghouse said it withdrew from the deal for Channel 9 because it had found better uses for its money, and because of doubts about how long it might take to secure an unchallenged license. Despite that withdrawal, some analysts believe the station could fetch nearly the same amount in the market today.

Comcapital’s Schutz noted that while the station is rated last among Los Angeles’ VHF television broadcast operations, it is not carrying the heavy programming debts that are now borne by many competitors. “They’re really not faced with the problems that face other independent stations,” he said.