In order to cushion itself from bearing the brunt of print
Time Warner Inc.
) had decided to spin-off subsidiary Time Inc. in 2013. Yesterday,
this Zacks Rank #3 (Hold) media giant unveiled further details of
the divestiture, including an announcement of a spin-off
The company intends to pay dividends on the shares of Time Inc. on
Jun 6, 2014, when the spin-off closes officially. The dividend
payment will be made on a pro rata basis, previously approved by
the parent company's board.
On the day of distribution, Time Warner's stockholders of record as
of May 23, 2014 will receive a share of Time Inc. each for every 8
shares of the parent company. However, fractional shares of the
ex-subsidiary will be consolidated and sold through open market
operations with the cash proceeds given to Time Warner shareholders
on a pro-rata basis, instead of distributing fractional shares
This strategy of special dividend payment is not uncommon if we
closely review Time Warner's past spin-offs. In 2009,
Time Warner Cable Inc.
), after being spun off from Time Warner, had also paid a special
Following the wind off, Time Warner will continue to trade under
the ticker "TWX" on New York Stock Exchange (NYSE) in the "regular
way." However, Time Inc. will trade on a "when-issued" basis under
the ticker name "TIME.WI" from May 21, after which it will trade
the "regular way" under the symbol "TIME" from Jun 9, which will
mark the end of the "when-issued" trading.
The company first announced its plan to spin-off Time Inc. in Mar
2013 which followed the negotiation between Time Warner and
) to create a magazine-based company, which, however, failed to
Management believes that the decision to offload Time Inc., which
includes brands such as People, Sports Illustrated, InStyle, Time,
Real Simple and Fortune, would augur well for Time Warner, as this
would facilitate the latter to concentrate purely on television
networks and film and TV production businesses.
Time Inc.'s magazines boast over 130 million readers nationwide per
month, and its websites witness traffic of approximately 50 million
The decision would be accretive to the shareholders of Time Warner
in the same fashion, when this diversified media conglomerate
divests Time Warner Cable and
) into independent companies.
Further, the company recently posted robust first-quarter 2014
earnings of 91 cents a share that surpassed the Zacks Consensus
Estimate of 88 cents and increased 20% from the prior-year quarter,
reflecting strength across Turner, Home Box Office (HBO) and Warner
Bros. Alongside, Time Warner's total revenue of $7,545 million
jumped 9% year over year, and cruised ahead of the Zacks Consensus
Estimate of $6,755 million.
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