Time Warner will gain US$9.25 billion -- and more flexibility in running its remaining businesses -- from its spin-off of Time Warner Cable later this year.
The media and online giant, parent of struggling Internet company AOL, laid out the details of the planned spin-off on Wednesday. It expects the transaction to be completed in the fourth quarter, pending regulatory reviews, local franchise approvals and a favorable ruling on the tax implications.
Time Warner owns 84 percent of Time Warner Cable, which serves almost 15 million subscribers with video, broadband and voice services in five parts of the U.S. The cable unit doesn't fit with the conglomerate's other businesses, Time Warner President and CEO Jeff Bewkes said in a prepared statement Wednesday.
"Each company will have greater strategic, financial and operational flexibility and will be better positioned to complete," Bewkes said. "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."
Through the multistage transaction, Time Warner will distribute its ownership of Time Warner Cable to its shareholders and collect $9.25 billion in a one-time dividend of $10.27 per share paid by Time Warner Cable. The cable company will finance the dividend with financing from a syndicate of banks.
The boards of directors of both companies have already approved the deal, which Bewkes announced on April 30.
Time Warner's vast media holdings include cable networks CNN and HBO; the Warner Bros. movie studio; and Time, People and Sports Illustrated magazines. But it has struggled to combine content creation and delivery, through AOL and the cable division, into a powerhouse business.