Allen in $2.8-Billion Deal to Buy Marcus Cable Stake

Billionaire investor and Microsoft co-founder Paul G. Allen has agreed to acquire all of the limited partnership interests in Dallas-based Marcus Cable, the nation’s 10th-largest cable operator, in a $2.8-billion transaction. It would be Allen’s largest single investment ever.

Company founder Jeffrey Marcus would remain general partner and chairman, though Allen will own the majority of the company. About a dozen top Marcus managers would be cashing out in the deal, as would Goldman Sachs, Hicks, Muse, Tate & Furst, Freeman Spogli and several other investment concerns.

The Marcus investment would be the latest for Allen’s portfolio of “wired world” investments, he said. These reflect his belief in a “connected future marked by the merger of high-bandwidth data channels, the power of the personal computer and the availability of compelling content,” Allen, 45, said in a statement. Allen’s other media and technology holdings include a $500-million (18.3%) stake in DreamWorks SKG and a 5.7% stake in Barry Diller-controlled USA Networks (formerly HSN Inc.). Those are in addition to his remaining stake in Microsoft--reported at 7.6% in the company’s latest proxy statement, issued last September.

Marcus has more than 100,000 subscribers in Los Angeles County, in the Glendale and Burbank areas. It acquired them from Sammons Communications in 1995, when it bought that company’s operations.

Marcus spokesman Joe Camicia said the company expects Allen’s involvement to accelerate its plans to offer new services such as high-speed Internet access. Marcus plans to introduce Internet access--now offered only in a pilot program in Forth Worth--to its Los Angeles-area customers by early next year.

Camicia called the deal a “tremendous endorsement for this company and this industry. . . . It shows that the cable industry in general is being recognized as a strong investment.” Since early this year, Marcus had been seeking, with the aid of Goldman Sachs, a deep-pocket “strategic partner.”

Despite increasing competition from satellite systems and telephone companies’ moving into cable service, traditional cable operators have maintained their huge lead in “subscription TV” delivery. Consolidation over the last few years has concentrated most of what had been a fragmented cable industry in the hands of a few major operators.

Entrepreneurial investors such as Allen, along with giant firms such as Microsoft, are banking that a “convergence” of computers and TV will provide a new market for entertainment and data delivered to the home. In recent months, a flurry of deals among cable operators, software companies and service/information providers has occurred.

Last year, Microsoft invested $1 billion in Comcast, the nation’s fourth-largest cable operator; Microsoft’s other forays in this area include its $100-million partnership with NBC to create MS/NBC, and its $425-million purchase of WebTV Networks. Two weeks ago, an agreement among cable giant Tele-Communications, BankAmerica and software maker Intuit was announced; BofA will develop banking services using Intuit software for TCI customers. The services will be introduced sometime next year.