Time Warner Cable should be on its own come the fourth quarter.
The boards of directors for the cable company and parent Time Warner Inc. agreed Tuesday for the spinoff of the nation’s second-largest cable operator. Under the plan, Time Warner Cable will pay shareholders a cash $10.27-per-share dividend, some $10.9 billion. Time Warner Inc. will receive $9.25 billion of that total for its 85.2% interest in the cable company, which counts some 14.7 million customers.
After months of speculation, Time Warner president and CEO Jeff Bewkes announced on April 30 that the companies would move ahead with the move, but didn't provide the details or a time table.
The transaction calls for Time Warner to exchange its 12.4% interest in TW NY Cable Holding, Inc., a subsidiary for 80 million newly issued shares of Time Warner Cable’s Class A common stock, effectively lifting the media conglomerate’s ownership stake in the cable operator to 85.2% from 84%. Additionally, Time Warner will convert its Time Warner Cable Class B common shares (each Class B common share has the equivalent voting power to 10 Class A common shares) into Time Warner Cable common shares on a one-for-one basis in a recapitalization that leaves the operator with one class of common stock.
Time Warner Cable, which established a two-year $9 billion bridge facility to fund the cash dividend, will carry a $13 billion debt load.
“Today's announcement marks the next important step in Time Warner Cable's evolution as a stand-alone, public company. In a single transaction we increase our strategic and financial flexibility, simplify our capital structure, enhance the public float and liquidity of our stock and return substantial capital to our stockholders,” said Time Warner Cable president and CEO Glenn Britt in a statement.” Importantly, we expect to accomplish all of this while maintaining solid investment-grade credit ratings. Paying a sizeable, one-time dividend is a reflection of our continued confidence in our growth prospects.”
Noted Time Warner president and CEO Jeff Bewkes: “This is the right step for Time Warner and Time Warner Cable stockholders. After the transaction, each company will have greater strategic, financial and operational flexibility and will be better positioned to compete. Separating the two companies also will help their management teams focus on realizing the full potential of the respective businesses and will provide investors with greater choice in how they own this portfolio of assets. 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.”