Time Warner (NYSE:TWX) plans to spin-off its cable company, Time Warner Cable (NYSE:TWC), to shareholders. In the process, the parent will get a payment of $9.25 billion as part of a one-time dividend. It will also let most of its debt go to the cable company, improving the balance sheet by a factor which should matter to shareholders.
According to The Wall Street Journal, "Time Warner could use its windfall to cut its debt further, buy back shares or make an investment."
Leaving aside the big debt which the cable company will have to handle, well over $23 billion, Time Warner will be left with cash and an odd assortment of businesses.
One of the key legs will be the magazine operations, which are not growing due to movement of advertising dollars out of print. The company will have its cable programming businesses like CNN and Turner. They have done well, and there is no reason to believe that the trend will change. The TWX studio operations run in a cycle, depending, at least to some extent on whether the movies produced do well.
