Time Warner Inc. and Time Warner Cable announced today that their respective boards have put the stamp of approval on Time Warner Cable separating from its parent company.
Time Warner Cable will pay a $10.9 billion one-time dividend for the separation. Time Warner Inc., which had an 84 percent stake in Time Warner Cable with the remainder of the shares owned by public stockholders, will receive $9.25 billion of the payout, or $10.27 per share, of Time Warner Cable’s common stock.
In April, Time Warner Inc. President and CEO Jeff Bewkes said that Time Warner would spin-off the cable unit in order to streamline the company’s operations. Time Warner Cable became a separately traded company last year.
“Today’s announcement marks the next important step in Time Warner Cable’s evolution as a stand-alone, public company,” said Time Warner Cable President and CEO Glenn Britt. “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. 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. Our separation from Time Warner also enhances our ability to compete aggressively and perform well in a highly competitive environment by delivering the innovative telecommunications services that our customers need, while making prudent investments to deliver continued value for our stockholders.”
Under terms of the deal, Time Warner will trade its 12.4 interest in TW NY Cable Holding Inc., a subsidiary of Time Warner Cable, for 80 million newly issued shares of Time Warner Cable’s Class A common stock, which will increase Time Warner’s ownership stake in Time Warner Cable’s common stock from 84 percent to 85.2 percent.
Time Warner will convert its Time Warner Cable Class B common shares – each Class B common share has the voting power equivalent to 10 Class A common shares – into Time Warner Cable common shares on a one-for-one basis in a recapitalization that results in Time Warner Cable having one class of common stock.
Time Warner Cable said it would fund the one-time dividend through its existing revolving credit facility and $9 billion from a new, committed two-year bridge term financing from a syndicate of banks. In addition, Time Warner has agreed to provide a commitment for a supplemental two-year term loan of up to $3.5 billion to enable Time Warner Cable to repay the bridge financing at its maturity, in case Time Warner Cable hasn’t replaced the bridge financing with long-term financing.
The deal, which is subject to the customary regulatory reviews, is expected to close in the fourth quarter.
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