Microsoft Co-Founder Allen May Try To Buy America Online, SEC Data Show

Microsoft Co-Founder Allen May Try To Buy America Online, SEC Data Show

By Stephen Kreider Yoder, Staff Reporter
The Wall Street Journal

May 4, 1993

Paul G. Allen, the secretive billionaire co-founder of Microsoft Corp., has launched a surprise offensive against America Online Inc. by filing documents with federal regulators saying he may seek to acquire the firm.

Mr. Allen is the largest shareholder of the Vienna, Va., company, a provider of telecommunications services for personal computers. His filing appears to reverse his recent public stance toward America Online. In an interview with The Wall Street Journal last week, Mr. Allen's financial adviser, William Savoy, said Mr. Allen didn't plan to ask for a board seat or increase his influence in any other way.

But in a new filing with the Securities and Exchange Commission, Mr. Allen said he may seek to acquire America Online in a tender offer, asset acquisition, merger or other business combination. The filing also said Mr. Allen, who now owns just under 25% of the firm's stock, may also seek a board seat.

In over-the-counter trading yesterday, America Online closed at $30.50, up $4.25.

Mr. Allen's sudden turnabout is apparently related to his concerns over America Online's adoption last month of a shareholder-rights plan that would be triggered should an investor exceed a 25% stake. "Certain recent events discussed below, in particular the adoption by the issue of a shareholder-rights plan, have caused Allen to reconsider his intent to continue to be solely a passive investor," the SEC filing said. Mr. Allen said in the filing that America Online won't give him a copy of the shareholder rights plan.

Mr. Allen's motives aren't clear. Hostile takeovers of high-growth technology companies are very rare, and America Online has some powerful shareholders who might resist, including Tribune Co. and Equitable Cos.

It's also unclear how America Online would fit into Mr. Allen's holdings, which include Asymetrix Corp., a Bellevue, Wash., maker of programs used for developing multimedia and other software; Interval Research, a Palo Alto, Calif., research lab; and stakes in several other small technology ventures. The 40-year-old Mr. Allen, who left Microsoft in 1983, still holds $3 billion in Microsoft stock. He also owns the Portland Trailblazers basketball team, and he is establishing a Jimi Hendrix museum in Seattle.

Mr. Allen, famous for avoiding contact with the press, didn't respond to requests for interviews. Calls were referred to Mr. Savoy, whose assistant said Mr. Savoy "won't be able to comment today."

Stephen Case, America Online's president, declined to speculate on the motives behind Mr. Allen's latest SEC filing. Although there have been "intermittent discussions" between Mr. Allen and America Online about possible collaboration, America Online considers Mr. Allen "just an investor," said Mr. Case.

Mr. Case said the company's shareholder-rights plan had been under discussion for some time and wasn't related to Mr. Allen's growing stake in the company. "We've built this company by establishing strategic alliances with a wide range of companies, and we believe it's the best strategy for the company to remain independent," said Mr. Case.

Mr. Allen had made an earlier filing with the SEC last week, saying he held a 25.2% stake in America Online. That figure proved incorrect; his stake is just under 25%, according to America Online. In the latest filing, Mr. Allen said he has been in discussions with America Online concerning his investment in the company. But America Online's Mr. Case wouldn't say whether such discussions occurred.