Time Warner Inc. announced March 6 that it would spin-off its publishing arm including Time and People Magazine by the end of 2013. The move comes after failed talks with Meredith Corporation about an outright sale.
Time Warner Chairman and Chief Executive Officer Jeff Bewkes said in a statement: “After a thorough review of options, we believe that a separation will better position both Time Warner and Time Inc. A complete spin-off of Time Inc. provides strategic clarity for Time Warner Inc., enabling us to focus entirely on our television networks and film and TV production businesses.”
The move to list Time Inc. as an independent publicly traded company continues Time Warner’s effort to streamline its media business. It has already sold or spun off AOL, Time Warner Cable and Warner Music. After the transaction, only TV networks (HBO, CNN, TNT) and its TV and film production arm (Warner Bros.) will be left.
Analysts from Bank of America think that the transaction could be a win for both Time Inc. and Time Warner. “We believe the spin will afford the secularly challenged Time greater strategic and operational flexibility on a standalone basis, potentially driving incremental value for shareholders,” the analysts write in a note to clients.
They also say that Time Warner will benefit from the scalability of its video and content business and that a growth drag will be removed. Out of the $28.73 billion the company generated in revenue in 2012, only $3.44 billion came from publishing. In addition, the segment is not growing anymore, with revenues down 7 percent over the year.
Meredith Corporation said in a separate statement that it was in talks with Time Warner to combine its National Media Group with most of Time Inc.’s titles. According to the Wall Street Journal, this would have excluded the most popular ones, Time, Fortune and Sports Illustrated. The Journal cites unknown sources who said the talks failed because of the complexity of the deal.
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