KGMB-TV sold
in $40M deal

The sale to Delaware company HITV Operating Co. Inc. must get FCC approval but is expected to close in a few months

KGMB-TV, which signed on as Hawaii's first television station in 1952, has been sold for $40 million in a cash deal to HITV Operating Co. Inc., a subsidiary of Virginia-based MCG Capital Corp.

Michael McHugh, managing director of MCG Capital, said by e-mail that HITV is a Delaware company "formed for the sole purpose of acquiring the station." He did not elaborate on the new owners' plans for the Hawaii station, and could not be reached by telephone last night.

MCG is a publicly traded company that lends to and invests in private firms in media and technology, seeking income and capital gains, according to Bloomberg News.

KGMB-TV OWNERSHIP HISTORY 1952: Signed on, owned by the Hawaii Broadcasting System * 1960: Purchased by the Honolulu Star-Bulletin 1965: Purchased by local broadcaster Cec Heftel 1977: Purchased by Iowa-based Lee Enterprises Inc. 2000: Purchased by Indiana-based Emmis Communications Corp. 2007: Purchased by Virginia-based MCG Capital Inc. subsidiary HITV Operating Co. Inc. * The Hawaii Broadcasting System also owned KGMB-AM radio, now known as KSSK-AM 590, and KPUA-AM in Hilo, now 670 on the dial. Heftel bought the TV and radio stations, which he sold after his election to Congress. The stations have not been jointly owned since 1977.

The KGMB deal includes 41,000 square feet of land at 1534 Kapiolani Blvd., where the station is located, plus other station facilities including neighbor-island satellite stations, equipment and its broadcast licenses. The land was assessed at $6.7 million in 2005.

The deal, which requires approval from the Federal Communications Commission, is expected to close in the first half of this year.

KGMB has 98 employees, who began hearing about the station's sale through news reports early yesterday afternoon.

Rick Blangiardi, Emmis Hawaii market senior vice president and general manager, later led a staff meeting.

"We've been in conversations with the MCG people since last fall," he told the Star-Bulletin.

"I was very encouraged by the things that they had to say, regarding, first and foremost, our employees, and secondly, about enhancing our competitive position in the Hawaii market."

He was also a key player in Emmis' sale of KHON to affiliates of the Blackstone Group, a private equity firm, and a company now known as Montecito Broadcast Group LLC, based in California. He described this transaction as different.

"This is not part of being swept up into some group (of stations). ... This is a very singular focus on KGMB," he said.

"This is being done by design, if you will, with respect to them really committing resources to our television station."

Emmis purchased KHON and three mainland TV stations in 1998 from SF Broadcasting, controlled by USA Networks Inc.

Emmis then purchased KGMB in 2000 as part of a 15-station deal and was allowed to own two top-rated Honolulu TV stations under waivers from the FCC, a decision media watchdogs criticized.

When Montecito officials took possession of the stations in January 2006, they announced sweeping job cuts at KHON and its new sister stations.

Blangiardi resigned his role at KHON to lead KGMB and steward it through the sale. Seven other managers left KHON in the following weeks.

Emmis announced its intention to sell its 16 television stations in May 2005, to focus on its core radio and publishing operations.

"The sale of KGMB will bring us one step closer to completing the orderly divestiture of our television assets," Emmis Chairman and CEO Jeff Smulyan said in a statement. Emmis has one remaining station, WVUE-TV in New Orleans.

Having KGMB for sale for so long was wearing, Blangiardi said.

"This has been a very long, arduous process, having a for-sale sign out, all the while working constantly to overcome uncertainty, rumors and whatever -- and yet drive performance and do the things that have been accomplished here."

The deal took so long to achieve because of "the Hawaii thing," he said.

"We didn't get packaged in with a group. This was an a la carte offering that, at the end of the day with cash flows, it hasn't been the most robust broadcast market -- and this was not a cheap price tag."

The buyer "had to want to do business in Hawaii and be willing to embrace our market and its uniqueness and all that comes with that," Blangiardi said.

The Office of Hawaiian Affairs was among the interested parties last year, but the agency's board voted down a proposal to explore a purchase.

Blangiardi also tried to put together a deal to purchase the station.

"I was only given permission late in the game to try to acquire KGMB," receiving the go-ahead Oct. 23.

He spoke with local and mainland investors and had retained the services of merchant bank Sennet Capital and Daniels & Associates LP, specialists in mergers and acquisitions, to raise additional money and try to "put the right debt and equity components together -- and honestly, we were almost there."

His negotiations with Emmis' potential buyers had to be at arm's length, as a result.

Given the circumstances, he has not spoken with MCG about staying on to lead the station, "but I would like to think that's a possibility," Blangiardi said.