Warner Bros. parent Time Warner will receive a $9.25 billion cash payment from 84%-owned Time Warner Cable under a spinoff plan the large MSO approved last week. Once completed, the transaction will position the separated companies to use their own stocks to finance acquisitions because they are more streamlined with narrower media-sector focuses.
Time Warner CEO/President Jeff Bewkes wants to streamline the sprawling entertainment/media conglomerate by exiting the cable-system business, where, with 14.7 million subscribers, Time Warner falls behind only Comcast in terms of size. Time Warner can use the cash it gets to pay down debt or make acquisitions, such as building its digital-media businesses.
Under the spinoff plan approved by Time Warner Cable's board, the MSO will make a cash $10.27-per-share dividend payment to shareholders, which totals $10.9 billion. Time Warner gets the $9.25 billion proportional slice of that. Time Warner Cable has a $13 billion net debt load already and has set up a two-year $9 billion bridge facility from banks to fund the cash dividend.
"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," Time Warner Cable president and CEO Glenn Britt said in a statement.