The Biggest Loser
In Paramount's acquisition of DreamWorks is Microsoft co-founder Paul Allen, according to this pair of New York Times articles:
Investor to Put $500 Million In New StudioBy GERALDINE FABRIKANT (NYT) 1146 words
Published: March 20, 1995Paul G. Allen, a co-founder of the Microsoft Corporation, has agreed to invest about $500 million to acquire 18.3 percent of Dreamworks SKG, the entertainment company that is controlled by David Geffen, Jeffrey Katzenberg and Steven Spielberg.
Mr. Allen's investment puts a value on the fledgling company of $2.7 billion. "It is very impressive because it is a great deal of money for a modest stake," said David Londoner, who follows entertainment for Wertheim Schroder & Company.
Messrs. Geffen, Katzenberg and Spielberg will retain two-thirds of Dreamworks, giving them stakes valued at about $600 million each. The remaining third, valued at about $900 million, is to be split among Mr. Allen and other investors. Mr. Geffen said the company planned to announce some, if not all, of the other investors within the next several weeks.
For Mr. Allen, a 42-year-old billionaire who has become involved in a wide range of computer, interactive and other businesses in the last 12 years, the Dreamworks deal represents his largest single financial commitment to date.
In a telephone interview yesterday from his home on Mercer Island, Wash., Mr. Allen explained his reasoning: "I am on the board of directors, I have a chance to work with three incredibly talented individuals who have a track record of producing. Based on the business plan and everything that is part of it, I am very optimistic about the returns."
Dreamworks will be in the film, television and music business. Mr. Allen talked enthusiastically about the possibilities in marrying such entertainment programming with increasingly sophisticated computer capability.
Take a $500 mm investment, add 10 years, and turn it into.... $258 mm?
Paramount paid a total of $1.6 billion, which included more than $500 million in outstanding debt, $775 million to the DreamWorks principals and $225 million to repay additional loans that had been made to DreamWorks by Universal, Technicolor and HBO, according to a Paramount executive involved in the deal...For Mr. Geffen, Mr. Spielberg and Mr. Katzenberg, two-third owners of DreamWorks, the deal is a rich one. Each is to receive about $172 million. Paul G. Allen, the Microsoft billionaire who was the principal investor in the studio and, with other investors, owned the other third of the company, will receive about $258 million.
I suppose it's nice to be able to lose $242 mm over a decade without breaking a sweat, but this doesn't really reinforce Allen's investment track record. Perhaps he should stick to Blazers and psychedelic boondoggles?
