Falcon cable TV bought by Allen for $3.6 billion

Microsoft co-founder continues quest for entertainment empire

May 27, 1999

NEW YORK -- Microsoft co-founder Paul Allen took another big step yesterday toward his goal of creating a technology and entertainment empire, with the $3.6 billion purchase of Falcon Communications, a closely held cable TV company.

The transaction, which includes cash, stock and assumed debt, will make Allen's Charter Communications the No. 4 cable television operator in the nation with 5.5 million subscribers.

The deal was the latest in a yearlong buying spree that has vaulted the multibillionaire into the top ranks of the U.S. cable industry, which is undergoing an extensive makeover as companies move toward offering phone, Internet and interactive video services over cable TV lines.

Allen has been advocating such a system for years and has been amassing an array of holdings in high-technology and entertainment businesses as part of his "wired world" strategy. His entry into the cable TV business a year ago was seen as a strong endorsement of that technology as a carrier of entertainment and interactive services.

Allen's other holdings include an Internet portal site called Go2Net, which offers personal finance and commerce features, and High Speed Access Corp., which provides high-speed Internet access over cable TV lines.

`Competitive edge'

"Charter has a competitive edge in the access and availability of these new interactive services," said cable analyst Aryeh Bourkoff of CIBC World Markets. "Given that Paul Allen has been a savvy investor in other properties, Charter customers are likely to benefit."

Allen also owns the Seattle Seahawks football team, and basketball's Portland Trail Blazers, following a strategy employed by Cablevision of New York, which owns interests in the NBA's New York Knicks and the NHL's New York Rangers.

Allen also has a stake in the DreamWorks SKG movie studio and is chairman of TicketMaster Group Inc.

He began his cable campaign a year ago with the $2.8 billion purchase of Marcus Cable Co., then the nation's largest privately held cable operator. In July, he bought St. Louis-based Charter in a $4.5 billion deal that has become the vehicle for his other cable buys.

Third-wealthiest American

Allen, who often shies away from publicity, has considered a public offering of stock in his cable ventures but has kept them private. Thanks to his large holdings of Microsoft stock, Allen has $22 billion, Forbes magazine estimates, making him the third-wealthiest American after Bill Gates and Warren Buffett.

The deal with Charter gives Falcon the financial backing and technological expertise to upgrade its cable lines, which are concentrated in California, the Pacific Northwest and the Southeast. Privately held Falcon is based in Los Angeles.

Founder Marc B. Nathanson, who controls 54 percent of Falcon, will become Charter's vice chairman. The other 46 percent of Falcon is owned by AT&T Broadband & Internet Services, which has approved the transaction.

AT&T, with its acquisitions of Tele-Communications Inc. and MediaOne Corp., is the nation's leading cable company, followed by Time Warner, Comcast Corp. and Charter.

AT&T also hopes to provide various telecommunications services over cable TV lines, including local phone service and high-speed Internet access.

Pub Date: 5/27/99

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