Time Warner, Cable Division Agree to Split

NEW YORK, May 21: The
boards of directors at Time Warner and Time Warner Cable have approved an
agreement to separate the two companies.

Time Warner will exchange
its 12.4 percent interest in TW NY Cable Holding, a subsidiary of Time Warner
Cable, for 80 million newly issued shares of Time Warner Cable’s Class A common
stock. This increases Time Warner’s ownership stake in Time Warner Cable’s
common stock to 85.2 percent. Time Warner Cable will declare a one-time dividend
to all of its stockholders of
$10.27 per Time Warner Cable common share—a total of approximately $10.9
billion. From this, Time Warner receives $9.25 billion. Time Warner will
convert its Time Warner Cable Class B common shares into common shares on a
one-for-one basis in a recapitalization that results in Time Warner Cable
having one class of common stock. Time Warner will distribute its entire
ownership stake in Time Warner
Cable to Time Warner stockholders. Time Warner Cable expects to fund the one-time
dividend through its existing revolving credit facility and $9 billion from a
new, committed two-year bridge term financing from a syndicate of banks. In
addition, Time Warner has agreed to provide a commitment for a supplemental
two-year term loan of up to $3.5 billion to enable Time Warner Cable to repay
the bridge financing at its maturity.

“This is the right step
for Time Warner and Time Warner Cable stockholders,” said Jeff Bewkes, Time
Warner’s president and CEO. “After the transaction, each company will have
greater strategic, financial and operational flexibility and will be better
positioned to compete. Separating the two companies also 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. 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 continued: “Once
the transaction is completed, Time Warner will have a streamlined portfolio of
leading businesses focused on creating and distributing our branded content
across traditional and digital platforms worldwide. Our company will also have
increased flexibility in its capital structure. We’ll continue to balance
investment opportunities against the benefits of returning capital directly to
our stockholders, within a disciplined financial framework intended to maintain
solid investment-grade credit ratings.”

Glenn Britt, Time Warner
Cable’s president and CEO, called the move “the next important step” in the
platform’s evolution as a stand-alone, public company. “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. Importantly, we expect to accomplish
all of this while maintaining solid investment-grade credit ratings. Paying a
sizeable, one-time dividend is a reflection of our continued confidence in our
growth prospects. Our separation from Time Warner also enhances our ability to
compete aggressively and perform well in a highly competitive environment by
delivering the innovative telecommunications services that our customers need,
while making prudent investments to deliver continued value for our
stockholders.”

—By Mansha Daswani