KKR buyout and attempted sale to Lorimar Storer Communications was taken private in a $1.6 billion
leveraged buyout (equivalent to $ in ) by
Kohlberg Kravis Roberts (KKR), a
merchant banker. Completed in December 1985, the buyout was engineered to thwart a
hostile takeover by
Comcast and an attempted liquidation of the company by dissatisfied shareholders. KKR purchased
Wometco Enterprises the previous year after no succession plan was found following the death of chairman
Mitchell Wolfson, and began the process of dismantling the conglomerate. Wometco already owned several television stations in markets where Storer owned cable systems, including WTVJ in Miami, and owned a cable system in Atlanta where Storer owned
WAGA-TV; the FCC's approval was conditional on KKR divesting in these overlapping markets. KKR originally planned to only sell WTVJ but soon entertained offers for some of the Storer stations. On May 21, 1986,
Lorimar-Telepictures, producer of
Dallas,
Knots Landing and
Falcon Crest for CBS, agreed to purchase the Storer stations,
production company, advertising sales division, Washington
news bureau and WTVJ for $1.85 billion (equivalent to $ in ), with WTVJ commanding $405 million. Lorimar was expected to dismiss Storer's corporate staff, prompting Virgil Dominic—by then WJW station manager and Storer's corporate news director—to be transferred back to WJW as news director. This deal collapsed by late October 1986 when Lorimar asked to have WTVJ excluded. Initially attributed to issues financing the deal and reduced
cash flow estimates for WTVJ, it was later revealed that CBS president
Laurence Tisch objected to Lorimar purchasing a significant portion of the affiliate base and threatened to disaffiliate all the CBS affiliates in the deal, including WJW. WTVJ was put up for sale separately by KKR and
sold to NBC on January 16, 1987.
George Gillett ownership, debt trouble, and sale rumors In 1987,
George N. Gillett Jr. acquired majority control of the Storer stations; the $1.3 billion deal (equivalent to $ in ) was financed through
junk bonds and represented a valuation of nearly 15 times cash flow for the group. KKR maintained 45-percent minority ownership. To satisfy federal regulations, Gillett's existing station group was spun off to Busse Broadcasting, a company formed by Gillett employees. Gillett was a major backer of local news production, to the point he called himself a "news junkie", but declined to commit to a larger budget for the station. Shortly after the takeover, WJW debuted an hour-long morning newscast in February 1988 that included Dufala, sportscaster
Dan Coughlin and meteorologist
André Bernier, the latter arriving from
KARE in
Minneapolis–Saint Paul. The newscast was seen as complementary to
CBS This Morning. Gillett's purchase of the Storer stations, renamed SCI Television, was troubled from the start. The junk bonds were raised prior to
Black Monday: by November 1987, Gillett recorded a 10:1 debt-to-profit ratio and faced a $153 million loan payment by October 1989. Rumors started to emerge of Gillett selling WJW, along with his stations in
Rochester, New York, and
Nashville. These rumors intensified by June 1988 when Gillett, who formerly had a role with the
Miami Dolphins, expressed interest in buying the
Seattle Seahawks. Potential buyers included CBS, Group W, a consortium of station employees,
Meredith Broadcasting, and former WUAB executive William Schwartz. While ownership denied WJW was itself up for sale, they did accept buy bids for review. WJW reportedly had an
asking price of $190 or $200 million, which market analysts saw as a discount given Cleveland's market size and the station's ratings performance but also reflected the high price paid for the group. At the same time, Dominic was promoted to president and general manager, replacing C. David Whitaker, who transferred to Gillett's Tampa station,
WTVT. By June 1989, WJW was officially taken off the market, reportedly due to WJW's ratings and a separate deal to sell his
Baltimore station,
WMAR-TV, falling through. Gillett's Nashville station
WSMV-TV was sold earlier in the year. Gillett boasted that the sale of WSMV was enough to shore up the company's financials, but the firm missed the October 1989 loan payment, prompting three creditors to ask the
United States Bankruptcy Court in Delaware that SCI Television be placed in involuntary
Chapter 7 bankruptcy while SCI offered a
debt for equity exchange. This exchange offer was agreed to within hours of a deadline placed by the Delaware court. Bondholders acquired a 39-percent stake in SCI, while Gillett saw his ownership reduced to 41 percent and KKR's reduced to 15 percent; KKR also cancelled a $190 million
debit note held on SCI. Gillett failed to meet a debt payment by August 1990, prompting
S&P Global Ratings to lower the rating for Gillett Holdings from a C to a D. WJW continued to be a standout for SCI, which was noteworthy given decreased investment in equipment and maintenance. By September 1991, the station cancelled
Cleveland Tonight and laid off all personnel involved, effectively disbanding WJW's local production department; the move was blamed on both Gillett's financial woes and the departure of Swoboda, who took on additional duties with the show before leaving. Swoboda's exit also rendered a $75,000 promotional campaign the station shot on film earlier in the year worthless.
Bankruptcy and takeover by Ronald Perelman WJW was again placed for sale in September 1990 after a second sale attempt for WMAR, but no offer materialized.
WNET president
William F. Baker expressed interest in WJW, having offered to buy WKYC from NBC the year before, and the president of
Viacom paid a visit to WJW's studios. Gillett's financial pressures continued to mount after the WMAR sale was renegotiated to a lower price and a Denver bankruptcy judge denied any further extensions on a
Chapter 11 filing. The
early 1990s recession also negatively impacted television station cash flow and advertising revenue, on top of Gillett's failure to divest assets prior to a decline in station valuation. Facing lawsuits from multiple creditors including
Apollo Partners,
Allstate and
Fidelity Investments, Gillett Holdings filed for Chapter 11 on July 26, 1991. After reaching another agreement with bondholders, Gillett Holdings was restructured in January 1992, with Gillett as a minority owner but maintaining day-to-day operational control. Investor
Ronald Perelman, regarded as a
corporate raider and the owner of
Revlon and
Marvel Entertainment, purchased majority control of SCI Television, including WJW-TV, on February 17, 1993, pushing Gillett out entirely. The transaction came through a bankruptcy court-approved Chapter 11 reorganization: Perelman's holding company
MacAndrews & Forbes made a $100 million investment in SCI, which was still burdened by $1.3 billion in debt, in exchange for 53 percent of its equity. WTVT was also included. After the deal closed, SCI was folded into Perelman's New World Entertainment and renamed
New World Communications. This was one of several deals Perelman made in rapid succession, as he then purchased a stake in Genesis Entertainment via
Four Star Television and directly purchased infomercial producer
Guthy-Renker. Perelman's takeover of SCI set off speculation regarding the station group's future with CBS, including using them to test future syndicated programming or to form a new network. The previous June, CBS announced a change in compensation for affiliates, owing to a $200 million financial shortfall for the network: affiliates, including WJW, were now being asked to repay as much of 25 percent of the money provided by CBS and also had to pay CBS in order to air specific programs. This came as WJW was already facing "several hundred thousand dollars" in decreased revenue. Dominic continued to reiterate support for CBS, saying, "[t]hey are the only network whose only business is the business of broadcasting" and "I think the country would suffer greatly if the network-affiliate system ever goes away". When CBS debuted
Late Show with David Letterman in August 1993, WJW delayed the show until midnight in favor of
Murphy Brown reruns, which netted more revenue from local advertising. With newfound resources under New World, WJW made a flurry of talent hires, including producer Andy Fishman, entertainment reporter David Moss, and anchor/reporter Lou Maglio, all of whom came to WJW from WEWS. WEWS lead anchor
Wilma Smith—who had been with the station for 17 years and was regarded as a "focal point"—inked a five-year deal with WJW on December 20, 1993, that included co-anchoring the 11 p.m. news and a revamped 5 p.m. news in the mold of WEWS's
Live on Five, which Smith co-anchored and which continually bested WJW in the ratings. Negotiations between Smith and Dominic began in secret after WEWS failed to meet a
right of first refusal deadline. Smith debuted at the station on April 3, 1994, after a non-compete clause with WEWS was honored, and said of Dominic, "... coming here with Virgil is like a dream come true. He knows what we go through, the insecurities—so understanding, someone I've always admired." == New World and the switch to Fox ==