The Miami Herald from Miami, Florida • 105

Takeovers New Wometco to sell its theaters is v2i r- 8 1 4vj 1 s-yX ifi y'r 4 i 9: -O (Sl JCi vt' ai cii-: K'tr 4t6 aJSsasA frf -54 7j 4 J4-V W' A v4 si 4'7y: a a I a'- av44 arj al 4 i i ivs GRIFFIN Miami Herald Staff Van Myers left and Arthur Hertz will head non-broadcasting division Sale nets daughter $101 million By LARRY BIRGER BuslnessMonday Editor When Miami-based Wometco Enterprises Inc is acquired this spring provided a last-minute glitch develops one of the first moves of the new owners will be the sale of the 45 movie theaters Most probably also sell two of best-known attractions the Miami Seaquarium and Citrus Tower in Claremont in Central Florida Also on the block will be -vending division which was built from scratch into one of the 10-largest machine-fed food-service operations in the United States Plans to sell these assets were disclosed in a voluminous proxy statement prepared for proposed sale the largest leveraged buyout in the United States to the New York banking firm of Kohlberg Kravis Roberts Co In a leveraged buyout the purchaser in this case KKR borrows most of the money and uses the cash flow from the operations to pay off the debt over an extended period Wometco shareholders will vote March 29 on the proposed buyout at $4650 a share Also being sold to KKR is the 15 per cent of Wometco Cable TV Inc that is held publicly For that stockholders will receive $2950 a share If shareholders approve and the Federal Communications Commission also agrees to the transfer of six television station licenses the deal could be consummated as early as next month and cost KKR slightly more than $1 billion KKR and its limited partners are financing their purchase by borrowing $660 million including $500 million from a group of banks headed by Continental Illinois of Chicago Another major lender is Teachers Insurance and Annuity Association of America which is putting up $27 million Van Myers and Arthur Hertz who will stay on as chief executive and administrative officers say sale of the amusement and vending units and also extensive real estate in Miami and Alaska was dictated by the need to raise cash to reduce the huge debt accumulated in the buyout the formula of a leveraged buyout you have to convert into cash those assets that produce sufficient return to justify the Hertz says What will be left of Wometco will be split into two companies Broadcasting will be headed by Anthony Cassera president and chief executive officer of Golden West Television owned by another KKR company Myers and Hertz will head up non-broad-casting which will include the 47 cable TV systems in 163 communities and the soft-drink operations Wometco is one of the largest Coca-Cola bottlers with operations in areas that serve 12 million people But Myers is quick to point out the company will not be in a hurry to dispose of its expendable assets is no fire he says not in a rush to sell There will be no bargains only sell when we find buyers who are willing to pay a fair The divisions up for sale however have not been among the star performers which is another reason to dispose of them Wometco closed five theaters during 1983 and the division lost money in 1981-82 By LARRY BIRGER BuslnessMonday Editor Despite some Wometco complaint that the buyout price of the leisure-time firm was "grossly many shareholders profited handsomely Frances Wolfson Cary daughter of the late Mitchell Wolfson and newscaster Ralph Renick for example The annual income on the 218 million shares that she either owns or controls pays about $961400 based on current dividend payout of 44 cents a share But dividends are taxed as straight income and in the 50-per-cent tax bracket that would reduce her yearly income to about $480700 At the buyout price of $4650 a share offered by Kohlberg Kravis Roberts Co stock would be worth $101602500 After payment of taxes at the capital gains rate of 20 per cent the net return would still be about $81282000 If that amount was merely invested in tax-free bonds yielding 9 per cent it would yield $7315380 each year instead of $480700 Another veteran corporate officer who declined to hold shares in the new company is newscaster Ralph Renick who has been with Wometco since 1950 He decided not to acquire an equity position in the new company for a different reason By selling the Wometco shares he holds Renick comes away with a hefty amount on which he too will only pay taxes at the capital gains rate of 20 per cent To own an equity position in the new company he would have to pay $5 for each share he asked for and there was little chance that Renick 55 would be able to sell them at an appreciated price for at least several years Said Renick who declined to say how many shares in Wometco he owns: would be a non-liquid asset I sell the shares I wanted to be more fluid in where I put my president in Wometco Cable and whose holdings of more than 1 million shares are worth nearly $50 million is buying a small equity position from KKR Together 31 company employes will wind up with 59 per cent of the non-broadcasting side and 4 per cent of the broadcasting side But have to pay $5 for each share they acquire They were given the ownership option in the restructured companies each of which will have 15 million shares of privately held stock Hertz 50 who will receive more than $22 million for the Wometco shares he holds will emerge as the largest shareholder among current managers by paying $1 million for 200000 shares in the two new companies Myers 66 who will get nearly $14 million for his Wometco stock will pay $200000 for 40000 shares KKR meanwhile will receive $10 million for negotiating the purchase agreement and will receive annual fees that start at $600000 and increase at a compound rate of 10 per cent yearly for managing the surviving companies Drexel Burnham Lambert Inc a New York investment banker hired to render an opinion as to whether the $4650 price was fair to the stockholders is being paid $1 million Merrill Lynch Capital Markets which also rendered a favorable opinion is getting $200000 And Continental Illinois will receive $12 million for bringing Wometco to the attention of KKR Not all shareholders are pleased with the Several class actions suits have been filed with one litigant claiming the price is inadequate and Another maintains that board had earlier turned down more than $50 a share Analyst Tavlin calls the $4650 full since Wometco is selling for 28 times 1983 earnings its earnings are growing rapidly" he maintains Adds State Beck: think a fair price and it could be underpriced Wometco has some very valuable Vending sales of $1026 million in 1983 were slightly ahead of 1982 but income declined to $38 million from $4 5 million a year earlier Analysts who follow the company say what new owners are doing is typical in a leveraged buyout a very usual technique that you streamline operations by selling off extraneous less productive assets and also real estate that is generally carried on the books at cost but could bring a big profit when sold" says Ed Tavlin of Prescott Ball Turben Wometco agrees "Vending is traditionally a very cyclical business that requires lots of capital And motion pictures the greatest growth business also think the company has very valuable real estate under the theaters So an intelligent way for them to reduce the leverage and not sell off the better assets" Except for two of its members the family will be out of the picture once the sale is completed Mitchell Wolfson Jr son of the founder who will be paid $845 million for his holdings will remain as one of seven directors He is investing $7 million of his own money to become a limited partner Louis Wolfson III a grandson who is a vice before earning a modest profit last year Seaquarium attendance dipped from Inc 950000 in 1980 to 525000 in 1983 with the Robert Beck a partner in State Street decline attributed to a general drop in tourism Research and Management Co of Boston in South Florida whose mutual funds hold a large position in Monday March 12 1984 bm The MIAMI HERALD 5.