Microsoft’s Allen to Sell USA Stake

Billionaire Paul Allen has agreed to sell his 5.9% stake in USA Networks Inc. for $568.7 million to raise money to buy cable systems that include some in Los Angeles, according to regulatory filings and sources close to the Microsoft Corp. co-founder.

Allen will sell 19.9 million shares of USA for $28.50 each in private transactions that are expected to be completed by Tuesday, according to the filings.

Sources say the USA sale is part of Allen’s strategy to gradually liquidate his once-diverse portfolio of companies to focus on cable and interactive television investments. Allen is a key financier of the Hollywood studio DreamWorks and also controls Charter Communications Inc., the nation’s fourth-largest cable operator.

“This really boils down to our focus on cable-related activities,” said Michael Nank, a spokesman for Vulcan Ventures Northwest Inc., Allen’s investment firm.

Charter is a leading contender for Los Angeles systems that Adelphia Communications Corp. plans to sell in the coming weeks to reduce its debt in an effort to salvage the company, which is under federal investigation for possible securities violations.

Allen has nearly quadrupled his investment in USA since 1997, when he sold the company his 49.6% stake in Ticketmaster and became a major shareholder.

At the time, USA shares were trading at $8. They closed Friday at $30.05, up 70 cents on Nasdaq.

USA is close to completing the sale of its USA and Sci-Fi cable channels to Vivendi Universal, becoming solely an electronic retailer, and sources close to Allen said the billionaire preferred putting his money back into Charter.

Adelphia is the largest cable operator in Southern California, with about 800,000 subscribers in Los Angeles alone. Allen has coveted these systems since 1999, when Charter lost to Adelphia in a bidding war for their owner, Century Communications.

Although Vulcan’s offices are in Portland, Ore., Allen has been eager to establish a home base in Los Angeles and is building a mansion here.

For Charter, which operates mostly in medium-sized and small markets, a big-city system such as Los Angeles would improve its standing in a fast-consolidating industry. Rivals such as Cox Communications Inc. and Comcast Corp. own systems mainly in large cities, where customers are more affluent and operating margins generally are higher.

Adelphia operates some of the most desirable systems in Los Angeles, including places such as Pacific Palisades, Brentwood, Bel-Air, Manhattan Beach and Redondo Beach.

A source close to Charter said Thursday that the Adelphia board will begin reviewing its sales options with the company’s advisors this weekend and could begin a formal auction process in mid-May. Adelphia is expected to sell systems that serve up to half of the company’s 6 million subscribers.

Adelphia could get $3 billion or more for the Los Angeles system. Charter could face competition from rival cable operators including AOL Time Warner Inc., which serves 500,000 subscribers in the region, and investment groups such as the one formed by former Charter Chief Executive Jerald Kent.