Investors say Time Warner should dump cable unit

Shareholders of Time Warner Inc, the world's largest media company, are urging Chief Executive Jeffrey Bewkes to get rid of the cable-television unit and buy back shares after the stock fell 30 percent from a 2007 high.

Splitting off the company's 84 percent stake in Time Warner Cable Inc would provide cash to repurchase $3.8 billion in stock, according to Chris Marangi, a fund manager at Gamco Investors Inc in Rye, New York, which owns 10.9 million Time Warner shares among $30 billion in assets.

Bewkes, who took over the New York-based company this year, said in February he would complete a review of Time Warner's cable stake by the end of this month. Marangi said he expects Bewkes to announce he's unloading the unit when Time Warner reports first-quarter earnings today.

'Unworkable structure'

"The current structure hasn't worked," Marangi said in an interview. "There's not an obvious benefit to owning the businesses under the same roof."

Marangi said his proposal for the cable systems may boost Time Warner's projected 2008 earnings per share by 28 percent through the reduction in stock outstanding. Under his plan, some Time Warner investors would exchange their stock for cable shares.

Analysts at Lehman Brothers Holdings Inc and Bear Stearns Cos say a repurchase may be financed by a special dividend paid to Time Warner by the cable unit.

Marangi is calling for Time Warner Cable to boost debt by 41 percent to $19.3 billion to fund a dividend and buyback.

"It makes sense to have two free-standing companies," said Henry Berghoef, research director at Chicago-based Harris Associates, which owns more than 63 million Time Warner shares among its $60 billion in assets.

The current structure is "one company with different economics, different characteristics".

Agencies

(China Daily 04/30/2008 page16)