New From Time Warner Cable: Dividend-on-Demand

Published on May 21, 2008
by John Paczkowski

Time Warner, the world’s largest media company, soon won’t be quite so large. This morning Time Warner revealed the details of its planned spinoff of Time Warner Cable, a massive transaction that will separate the company’s content and distribution businesses once and for all.

The deal, which has been approved by both companies’ boards, calls for Time Warner Cable to pay a hefty $10.9 billion one-time dividend to shareholders. As parent company, Time Warner (TWX) will pocket $9.25 billion of that payout.

It’s a flashy move for Time Warner’s new CEO Jeff Bewkes, who’s been hard pressed to reinvigorate the company’s stock price. “After the transaction, each company will have greater strategic, financial and operational flexibility and will be better positioned to compete,” he said 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.”

That’s all well and good, but how does Time Warner plan to realize the full potential of a $9.25 billion payout? By buying a company or two, perhaps. “Our share of the special dividend will clearly enhance our financial flexibility,” Bewkes said during a conference call this morning. “… We’re looking at all of the usual uses of capital, including returning capital to stockholders, including disciplined acquisitions and including investing further in our business.”

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