By Published on .

Triggered by the default last month on a $100 million bridge loan, Christopher Whittle's media empire is headed for imminent breakup, Advertising Age has learned.

Nicholas Glover, president of Medical News Network, is expected to tell the staff today that the unit is being sold to Reuters, insiders say. A deal could be finalized by the end of the month.

Separately, GS Capital Partners, an equity investment fund managed by Goldman, Sachs & Co., is negotiating to pay somewhere between $50 million and $100 million for a 50% equity position in "Channel One," the educational TV service that reaches about 12,000 classrooms.

"He's cashing out. He's selling half the cow," one knowledgeable Wall Street source said. "This raises the issue: How credible can he be in the future? A year ago he was trying to raise half a billion for the Edison Project and failed."

The deals, when finalized, would leave Whittle Communications with only the Edison Project, which aims to raise educational standards by privatizing existing public schools. The Edison Project is not slated to launch until fall 1995.

The catalyst for the big sell-off was Whittle's default last month on a bridge loan of close to $100 million that was originally hammered out by a coalition of three banks-Toronto Dominion, Bank of Boston and Bank of New York-and used to bail out the company two years ago.

"Channel One," founded five years ago, is believed to be making money. The other enterprises in the company are not.

"The viability of `Channel One' is there," said Michael Wolf, a partner and head of the media group at Booz Allen & Hamilton, New York. "It reaches a unique audience from an advertiser's perspective and, despite a lot of concerns from educators, it clears a lot of classrooms."

Mr. Whittle, chairman of Whittle Communications, didn't return calls. But insiders say the breakup was engineered by Donald Johnstone, who was installed as president-CEO earlier this year. Mr. Johnstone previously was president-CEO of Philips Consumer Electronics Co. and came in after parent NV Philips increased its stake in Whittle.

In a prepared statement, the company acknowledged only that it "is working with an investment bank to serve as our adviser to explore future financing options. These options may include the offering of public debt securities."

As recently as February, Mr. Whittle said he had the ad support to launch Medical News Network, a news service aimed at doctors. But even then he pointedly refused to entertain questions about his other properties.

A week after flying to New York from the company's Knoxville, Tenn., headquarters to make that announcement, Mr. Whittle said he was shutting down Special Reports, the magazine properties that had helped propel the company into the media spotlight in early 1988.

The launch of Special Reports had also helped attract Time Warner as an investor, with an infusion of $185 million for 50% of the company. By late 1992, Time Warner had apparently grown disenchanted with Whittle, and the Time Warner stake was identified as one of a number of assets that Time Warner sought to "monetize."

Time Warner's stake is now about 33.4%, as is Philips'; the U.K.'s Associated Newspapers holds 22.3%; Mr. Whittle and inside partners hold 10.9%.

Doug Greenlaw, chairman of the Whittle Ventures new-media unit, is believed to be close to leaving the company. Mr. Greenlaw was unavailable for comment.

Medical News Network is very attractive to Reuters, which acquired the similar VAMP Health in Europe last November for about $20 million, but needs more programming. Sources say, however, that key MNN programmers may not stay.

Joe Mandese and Jan Jaben contributed to this story.

Most Popular
In this article: