Allen to Buy 2% of Allegiance Telecom

Allegiance Telecom Inc. said Paul Allen’s Vulcan Ventures Inc. will pay $75 million for a 2% stake in the local phone operator, with the option to increase that stake to 10%. As part of Microsoft Corp. co-founder Allen’s “wired world” strategy, his investment firm Vulcan Ventures will buy 1.5 million shares of Allegiance common stock from its existing private equity investors at $50 per share. The deal also grants Vulcan an option to purchase as many as 5 million more shares--or an 8% additional stake--at $56 per share, on or before Nov. 1, from existing investors, for a total potential investment of $355 million. Allegiance shares fell $3.75 to close at $42.63 on Nasdaq. As part of the deal, Vulcan Ventures has the right to appoint a director to the board of Allegiance.