Time Warner Inc. and Time Warner Cable Inc. 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.
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.
Originally posted on May 21, 2008 @ 10:25 am