Allen's dreams grow
Software giant ups D'Works stake to 24%
Allen bought part of the interest held by South Korean food conglomerate Cheil Jedang Corp., concluding long-running negotiations that have started and broken down several times since earlier this year (Daily Variety 5/1/98).
Cheil, which held 11%, has sold a little more than half of its interest and is left with about 5%. Allen already had about 18%, so the extra equity gives him a little more than 24%, sources said.
He and Cheil were the two biggest outside investors, after the 66% stake held by the three principals: Steven Spielberg, David Geffen and Jeffrey Katzenberg.
People close to the situation said Allen's investment reflected his bullishness about DreamWorks' prospects. "Its a big vote of confidence in DreamWorks that he is willing to take more," said one observer.
Asian crunch
Cheil's decision to sell its stake reflected pressures caused by the Asian financial crisis. In recent months the South Korean government has told local companies to stop investing money outside of the country.
The outside investors who committed money to DreamWorks make quarterly capital contributions, based on the company's annual budgets. Cheil, for instance, which committed to put up $300 million for its 11% stake, had put in about half of that by earlier this year.
It arranged a letter of credit from a U.S. bank to help fund its March capital call, sources said. In the meantime, it negotiated to sell part of its stake to Allen, but the talks broke down several times over price, sources said.
Cheil and Allen managed to come to an agreement on price last week, as the June 30 capital call was looming, sources said. Allen ended up taking over Cheil's unfunded portion as well as a small amount of its existing equity.
$500 million ante
Allen originally committed to put in up to $500 million for his stake, so the deal brings his total commitment to DreamWorks to a maximum of about $660 million. He is yet to fully contribute his original commitment, however.
A DreamWorks spokesperson said, "We do not comment on our shareholders' activities."
Allen's rep did not return calls.
(Nick Madigan in Los Angeles contributed to this report.)
