Time Warner Cable Spinoff and NBC Universal Rumors

When Time Warner (TWX) CEO Jeff Bewkes said on the company's post-earnings conference call three weeks ago that they'd be announcing details on their spinoff of its cable division "very soon," he meant it.

Wednesday morning Time Warner revealed how it plans to spin off its 84 percent ownership stake in Time Warner Cable (TWC). As part of the deal, the cable company will pay a one-time $10 per-share dividend, which adds up to a $9.25 billion dollar windfall. Bewkes says this infusion will allow Time Warner to return cash to shareholders, invest in its content-focused businesses, or make purchases.

Time Warner Cable--the country's second largest cable company after Comcast (CMCSA)--is making this happen by borrowing $10.9 billion, or $10.27 a share. This news sent TWX stock up while TWC stock made gains as well. Investors pleased about the new flexibility this gives both companies to pursue their core businesses.

This is a huge step in Bewkes' strategy of transforming Time Warner into a true content company. Huge. The next step is selling AOL's nuts and bolts business, and perhaps spinning off the entire division. Then, Time Warner will be a true pure-play content creator and distributor with the publishing/magazines division, the cable networks and the movie studio.

When the company isn't bogged down with an ancient-seeming AOL subscription business, it'll be able to focus on creating high quality content and monetizing it by distributing in as many ways as possible.

This more narrow company is an interesting about-face from the synergy-crazed merger-mania phase nearly a decade ago when Time Warner was bought by AOL. A recession and several economic downturns later, "synergy" can sound like a bad word, while monetization is now the hot button issue.

And despite denials, rumors are still swirling that GE (GE) would consider spinning off its entertainment properties--NBC Universal, CNBC's parent. And I'm hearing that Time Warner is considered the front runner to merge with NBC Universal, since other than its movie studios and cable news channels (CNN and MSNBC), its content properties are almost entirely complimentary.

NBC Universal doesn't have a publishing division. Time Warner doesn't have a broadcast TV network. It's still a ways off, but mark my words, execs at both companies are thinking about it.

Comments

[No Moss]

Thanks for the article. You might want to change "complimentary&qu... meaning "free", to "complementary&qu... meaning "adding to something already existing".

Yeah, Jeff Immelt doesn't want to tip his hand concerning NBCU, since that might damage his bargaining power, but he's got to be thinking about getting rid of a business that is not performing at a double digit rate and is really unrelated to the core GE business.

Do you have any idea what NBCU is worth?