Suit Filed Against Whittle in Sale of Channel One

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Whittle Communications' sale of the Channel One classroom television network last year has triggered a $40 million lawsuit from a would-be buyer.

Goldman, Sachs & Co., the New York City-based investment-banking concern, filed the lawsuit in a state court this month against Whittle Communications and its founder, media entrepreneur Christopher Whittle. The suit challenges the sale of Channel One to the K-III Communications Corp.

The merchant-banking arm of Goldman, Sachs had been negotiating to acquire a 55 percent stake in Channel One last year, according to the lawsuit. Goldman planned to invest $65 million for the stake and underwrite an effort by Channel One to borrow $150 million, the suit states.

Goldman accuses Mr. Whittle and his company of misleading it by promising not to negotiate the sale of Channel One with any other company. In September 1994, however, Whittle Communications accepted an offer for all of Channel One by K-III, a New York City-based media conglomerate. (See Education Week, Sept. 7, 1994.)

Complex Negotiations

In October of last year, K-III completed the purchase of Channel One for a reported $250 million.

Goldman, Sachs is seeking $40 million in damages for breach of contract, according to the lawsuit.

The suit contends that Mr. Whittle was unhappy with a compensation package offered him by Goldman, but that he agreed not to veto the deal as long as his partners in Channel One agreed to it. But, the suit contends, Mr. Whittle did veto the deal even though the partners--Time Warner Inc., Phillips Electronics N.V., and Associated Newspaper Holdings PLC--agreed to it.

Mr. Whittle declined comment on the lawsuit last week, and officials at Goldman, Sachs declined to discuss it.

Knoxville, Tenn.-based Whittle Communications sold Channel One as part of a broad dismantling of the once-groundbreaking media company. It had become swamped in debt after the failure or mediocre performance of some of its properties.

By 1994, the controversial classroom news program, which airs daily in secondary schools and includes two minutes of advertising, was believed to be one of Whittle's few profitable assets.

A spokesman for K-III said last week the company had no comment on the lawsuit and that it should have no effect on Channel One.

Vol. 15, Issue 07

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