Time Warner plans cable spinoff

Wed May 21, 2008 12:03pm EDT
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By Kenneth Li

NEW YORK (Reuters) - Time Warner Inc (TWX.N: Quote) will completely split with Time Warner Cable Inc TWC.N by the end of the year, and receive a $9.25 billion payout, to separate its media content and distribution businesses.

The plan will break up a two-decade marriage of traditional distribution and content, a strategic combination of assets that has fallen out of favor on Wall Street as big media corporations compete with faster-moving Internet companies.

Left unanswered is how Time Warner Inc's 85 percent ownership of Time Warner Cable will be distributed to Time Warner Inc shareholders. Details will be decided closer to the closing of the deal in the fourth quarter, executives said.

The long-expected move lifted Time Warner Inc shares 2 percent in morning trading on the New York Stock Exchange, while Time Warner Cable shares rose 3.5 percent.

Wall Street has clamored for the once top media company to streamline its focus as a pure media content company -- with the Warner Bros movie studios, Time Inc magazines and Turner cable networks -- and stem a stock-price decline.

It will also leave Time Warner Inc more time to determine what to do with its AOL Internet division, whose growth has been eclipsed by Web leaders like Google Inc (GOOG.O: Quote) and Yahoo Inc (YHOO.O: Quote). Time Warner Inc has continued to discuss with Yahoo and Microsoft (MSFT.O: Quote) a transaction to sell, spin off or merge its AOL division, sources have said.

"Two independent companies will have better long-term strategic, financial and operational flexibility, something we believe is of growing importance," Time Warner Inc Chief Executive Jeffrey Bewkes told analysts on a conference call.

Investors will be eager to hear how Time Warner plans to invest the payout for the media company.   Continued...

<p>People walk in front of the Time Warner Inc. headquarters building at Columbus Circle in New York, October 13, 2005. REUTERS/Nicholas Roberts</p>