Media conglomerate Time Warner Inc. and cable television arm Time Warner Cable Inc. said Wednesday their boards have approved the companies’ legal separation, with Time Warner Cable expected to pay a hefty $10.9 billion one-time dividend to shareholders.
As parent of the nation’s second-largest cable operator, Time Warner will receive $9.25 billion of the payout, or $10.27 per share of Time Warner Cable common stock. The dividend will be distributed just before the deal is completed.
“After the transaction, each company will have greater strategic, financial and operational flexibility and will be better positioned to compete,” said Time Warner President and Chief Executive Jeff Bewkes in a statement. “Separating the two companies 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.”
Time Warner said it will swap its 12.4 percent stake in TW NY Cable Holding Inc., a unit of Time Warner Cable, for 80 million new Time Warner Cable Class A common stock — boosting its ownership in the cable and high-speed data and voice services provider to 85.2 percent from 84 percent.
Time Warner also will convert its Time Warner Cable Class B common shares, each of which has the voting power of 10 Class A common shares, into Time Warner Cable common stock on a 1-for-1 basis — creating just one stock class.
Time Warner Cable said it will fund the dividend through its existing revolving credit facility and $9 billion from a new, two-year bridge term financing from a syndicate of banks. In addition, Time Warner has agreed to provide a supplemental two-year term loan of up to $3.5 billion to allow Time Warner Cable to repay the bridge financing at maturity if the company hasn’t yet negotiated long-term financing.
The deal is expected to close in the fourth quarter, subject to a favorable Internal Revenue Service ruling on its tax treatment as well as regulatory reviews and local franchise approvals.