Time Warner Inc. (NYSE:TWX) and Time Warner Cable Inc. (NYSE:TWC) today
announced that their respective boards of directors have approved an
agreement that will result in the complete legal and structural
separation of the two companies.
Time Warner President and Chief Executive Officer Jeff Bewkes said: “This
is the right step for Time Warner and Time Warner Cable stockholders.
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.”
Mr. 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.”
Time Warner Cable President and Chief Executive Officer Glenn Britt
said: “Today’s
announcement marks the next important step in Time Warner Cable’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.”
The transaction will include the following steps:
-
Time Warner exchanges its 12.4% interest in TW NY Cable Holding Inc.,
a subsidiary of Time Warner Cable, for 80 million newly issued shares
of Time Warner Cable’s Class A common stock –
increasing Time Warner’s ownership stake in
Time Warner Cable’s common stock from 84%
to 85.2%;
-
Time Warner Cable declares 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 –
payable immediately prior to completion of the separation;
-
Time Warner receives $9.25 billion from this dividend;
-
Time Warner converts its Time Warner Cable Class B common shares (each
Class B common share has the voting power equivalent to 10 Class A
common shares) into Time Warner Cable common shares on a one-for-one
basis in a recapitalization that results in Time Warner Cable having
one class of common stock; and
-
Time Warner distributes its entire ownership stake in
Time Warner Cable to Time Warner stockholders in a tax-efficient
manner. The exact form of the distribution will be determined shortly
before the closing of the transaction, based on market conditions.
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, in the unlikely event Time
Warner Cable has not replaced the bridge financing with long-term
financing. At the completion of the transaction, Time Warner and Time
Warner Cable both expect to have solid investment-grade credit ratings.
The transaction is contingent on a favorable IRS ruling on its tax
treatment as well as customary regulatory reviews and local franchise
approvals. The transaction is expected to close in the fourth quarter.
The Time Warner Cable board of directors approved the transactions
following a unanimous recommendation by the members of the Special
Committee of Independent Directors that was formed for the purpose of
reviewing, considering, evaluating and participating in the negotiations
concerning the transactions.
Citigroup Global Markets Inc. and Goldman, Sachs & Co. are serving as
lead financial advisers to Time Warner. Cravath, Swaine & Moore LLP is
serving as legal adviser to Time Warner. Additionally, BNP Paribas
Securities Corp., Banc of America Securities LLC, Deutsche Bank
Securities Inc. and Wachovia Capital Markets, LLC are providing
financial advice to the management of Time Warner. Morgan Stanley &
Co. Incorporated is serving as financial adviser to Time Warner Cable,
and Evercore Group L.L.C. is serving as financial adviser to the Special
Committee of Time Warner Cable’s board of
directors. Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as
legal adviser to Time Warner Cable, and Skadden, Arps, Slate, Meagher &
Flom LLP is serving as legal adviser to the Special Committee.
About Time Warner Inc.
Time Warner Inc. is a leading media and entertainment company, whose
businesses include interactive services, cable systems, filmed
entertainment, television networks and publishing.
About Time Warner Cable Inc.
Time Warner Cable is the second-largest cable operator in the U.S., with
technologically advanced, well-clustered systems located mainly in five
geographic areas – New York State (including
New York City), the Carolinas, Ohio, southern California (including Los
Angeles) and Texas. As of March 31, 2008, Time Warner Cable served
approximately 14.7 million customers who subscribed to one or more of
its video, high-speed data and voice services, representing
approximately 33.0 million revenue generating units.
Information on Time Warner & Time Warner Cable Conference Call
Time Warner and Time Warner Cable will hold a joint conference call
at 8:30 am ET on Wednesday, May 21, 2008.
Please dial in at least ten to fifteen minutes before the call's
scheduled start to ensure you are connected in time for the beginning of
the call.
You are also invited to listen to the call live on Time Warner’s
Web site at www.timewarner.com/investors
or Time Warner Cable’s Web site at www.timewarnercable.com/investors.
There will be a replay available beginning approximately two hours after
the call has ended.
Caution Concerning Forward-Looking Statements
This document includes certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements include, but are not limited to, statements
about the benefits to Time Warner and Time Warner Cable of the
separation. These statements are based on the current expectations or
beliefs of both companies’ management, and
are subject to uncertainty and changes in circumstances. Actual results
may vary materially from those expressed or implied by the statements
herein depending on whether the separation transaction is consummated in
the manner contemplated, or at all, as well as due to changes in
economic, business, competitive, technological, strategic and/or
regulatory factors, and other factors affecting the operation of the
businesses of Time Warner and Time Warner Cable. More detailed
information about these factors may be found in filings by Time Warner
and Time Warner Cable with the Securities and Exchange Commission,
including their most recent Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q. Time Warner and Time Warner Cable are under no
obligation to, and expressly disclaim any such obligation to, update or
alter their forward-looking statements, whether as a result of new
information, future events, or otherwise.
