Time Warner works out details of split with Time Warner Cable

By Lisa Kerner

Charlotte, N.C., May 21 - The boards of directors of Time Warner Inc. and Time Warner Cable Inc. approved an agreement that will result in the complete legal and structural separation of the two companies, it was announced on Wednesday.

According to a Time Warner news release, the separation transaction will include the following steps:

• Time Warner will exchange its 12.4% interest in Time Warner Cable subsidiary TW NY Cable Holding Inc. for 80 million newly issued shares of Time Warner Cable's class A common stock. As a result, Time Warner's ownership stake in Time Warner Cable's common stock will rise to 85.2% from 84%;

• Time Warner Cable will declare a one-time dividend of $10.27 per share, or a total of approximately $10.9 billion, payable to shareholders immediately prior to completion of the separation. Time Warner will receive $9.25 billion from this dividend;

• Time Warner will convert its Time Warner Cable class B common shares into Time Warner Cable common shares on a one-for-one basis in a recapitalization that will give Time Warner Cable one class of common stock; and

• Time Warner will distribute its entire ownership stake in Time Warner Cable to Time Warner stockholders.

The transaction is expected to close in the fourth quarter of 2008.

To fund the one-time dividend, Time Warner Cable will use its existing revolving credit facility and $9 billion from a new, committed two-year bridge term financing from a syndicate of banks, the company said.

Once the transaction is complete, Time Warner and Time Warner Cable both expect to have solid investment-grade credit ratings, the news release stated.

"After the transaction, each company will have greater strategic, financial and operational flexibility and will be better positioned to compete," Time Warner president and chief executive officer Jeff Bewkes said in the release.

"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," Bewkes added.

Time Warner Cable president and CEO Glenn Britt said that in a single transaction, his company increases its strategic and financial flexibility, simplifies its capital structure, enhances the public float and liquidity of its stock and returns "substantial" capital to stockholders.

Citigroup Global Markets Inc. and Goldman, Sachs & Co. are lead financial advisers to Time Warner. Morgan Stanley & Co. Inc. is advising Time Warner Cable, and Evercore Group LLC is the financial adviser to the company's special committee.

Time Warner is a New York-based media and entertainment company. Time Warner Cable is the second-largest cable operator in the United States.

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