Time Warner Dumps Time Inc., and Wall Street Loves It
The pending Time Warner/Time Inc. divorce has given the people who lunch at places like The Lambs Club a lot to talk about: Is it a done deal, or still in motion? If Time Warner does manage to combine its publishing assets with Meredith in a new public company, who’s going to run it? Will the new JV hang on to all its titles, or will it sell some off?
But that kind of chatter doesn’t matter much to Wall Street, which is very happy that Time Warner CEO Jeff Bewkes has finally decided to dump his magazines. Time Warner shares closed at $53.63 today, up 2.5 percent since midday Tuesday, when the news first broke.
And that boost was enough to bring TWX to levels it hasn’t seen since the fall of 2007. Back then, Dick Parsons still ran the company, and it still owned AOL and Time Warner Cable. And Lehman Brothers wasn’t a smoking crater.
The bump reflects the certainty that even if the Meredith joint venture doesn’t happen — and my understanding is that those talks are quite far along at this point — Bewkes has now committed to dumping publishing, period.
Smart people I talk to say that if the Meredith deal falls apart, then the next step would be to pursue a public spinoff, a la Time Warner Cable and AOL. While I had originally assumed that both traditional publishers and non-strategic investors would want to take a crack at Time Inc., I’ve since become disabused of that notion: A straightforward sale would create a huge tax bill for Time Warner, because even in their declining state, some of these magazines are going to create huge capital gains. Spinning them off into a newco should solve that.