Time Warner, cable unit agree complete separation
Time Warner Inc, the world's largest media company, and Time Warner Cable Inc agreed on a complete separation and a $10.9 billion one-time cash dividend.
Time Warner will receive $9.25 billion of the dividend in the spinoff of Time Warner Cable, its cable-television unit, the companies said in a statement yesterday.
"This is the right step for Time Warner and Time Warner Cable stockholders," Time Warner Chief Executive Officer Jeffrey Bewkes said in the statement. "We're bullish on Time Warner Cable's prospects, but its strategic goals and capital needs are increasingly different from those of our other businesses."
By disposing of the 84 percent stake in Time Warner Cable, Bewkes is responding to pressure from investors to focus on the New York-based company's entertainment businesses and turn around the AOL Internet unit. Profit at AOL plunged 74 percent in the first quarter as a 1 percent increase in advertising sales failed to make up for a shrinking Web-access business.
Time Warner said it will distribute its entire stake in Time Warner Cable to stockholders "in a tax-efficient manner". The exact distribution form has yet to be decided and will depend on market conditions, the companies said.
Time Warner gained 2.9 percent to the equivalent of $16.63 as of 12:40 pm in Frankfurt, from a close of $16.15 in New York trading on Tuesday.
Time Warner Cable, the second-largest US cable company behind Comcast Corp, said it will fund the dividend through an existing revolving credit facility and $9 billion from a new two-year syndicated loan. Both companies said they aim to have "solid investment-grade credit ratings" after the transaction.
Sales at Time Warner Cable rose 8 percent to $4.16 billion in the first quarter. The unit's net income declined 12 percent to $242 million after marketing costs rose and the company recorded a gain from an asset sale a year earlier.
Bewkes, 55, who became Time Warner CEO in January, said in April the company would dispose of the cable-systems business.
Agencies
(China Daily 05/22/2008 page17)
