Allen strikes again
Microsoft co-founder pays $1.4B for piece of Intermedia
1/29/99
Microsoft Corp. co-founder Paul Allen's Charter Communications made its third major cable investment, engineering a $1.4 billion deal that will give him a chunk of Intermedia Partners.
In a three-way transaction among Allen's Charter, Intermedia and Intermedia's 49%-owner Tele-Communications Inc., Allen will wind up with systems serving 260,000 subscribers in the Southeast. Having bought Charter and Marcus Cable last year, that will bring Allen's portfolio up to 2.7 million subscribers and make Charter the sixth-largest MSO.
The entire deal is worth $2.4 billion, but TCI is keeping a big chunk of Intermedia's systems serving 300,000 subscribers for itself. Charter is buying two of Intermedia's three partnerships.
While institutional investors in the deal will be paid in cash, TCI wants some of Intermedia's systems, notably its core metro Nashville cluster that covers virtually the entire market.
Further, TCI and Charter are pruning holdings that fall outside of their main clusters by trading systems through Intermedia.
So Charter is acquiring 400,000 subscribers by paying $890 million in cash, plus trading systems serving another 140,000 subscribers. It will wind up with systems in Greenville/Spartanburg, S.C.; Athens and Gainesville, Ga.; Asheville, N.C.; and Kingsport, Tenn.
Charter chairman Jerry Kent said the complicated deal ultimately strengthens his regional operations, which already had a substantial presence in the Southeast. Clustering has become increasingly important for operators developing advanced services, in large part by spreading the technology and marketing costs over a greater subscriber base in a market.
By getting Nashville, TCI, which is being taken over by AT&T Corp., will add another cluster that covers an entire U.S. market. Intermedia will continue to run the Nashville system as well as a third partnership that controls 700,000 subscribers in Kentucky
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