Time Inc., publisher of more than 20 titles, will trade as a new company in 2014, according to a regulatory filing yesterday. The filing is preliminary and didn’t specify dates for the spin-off beyond next year.
Separating the magazine unit will shield Time Warner’s more lucrative cable networks and film studio from the publishing industry’s struggles with the transition to the Internet and lower advertising rates. Time Warner Chief Executive Officer Jeff Bewkes said in March he would spin off the unit, which analysts project has an enterprise value of about $3.9 billion.
As Time Warner’s worst-performing division, Time Inc.’s sales through the first nine months of this year fell 3 percent to $2.38 billion, while operating income climbed 5 percent to $230 million. For 2012, Time Inc.’s operating profit was $420 million.
Bewkes’s announcement earlier this year followed a failed attempt to create a joint venture with Meredith Corp., the publisher of women’s titles such as Ladies’ Home Journal. The magazines would have formed the basis of a new publicly held business focused on women, a person familiar with the matter said at the time. The talks broke down after Time Warner decided it wanted to unload all of its 21 publications at once instead of just the women’s-focused titles, the person said.
Bewkes named former Time Warner executive Joe Ripp to lead the company in July. The publisher also added Food & Wine magazine, Travel & Leisure and Departures when it acquired American Express Co.’s publishing unit in September.
News Corp. split into two companies in June: News Corp., focused on newspaper publishing; and 21st Century Fox Inc., which houses the previous company’s more valuable television and film assets.
As a public company, projections for Time Inc.’s enterprise value -- or the sum of its equity and debt minus cash -- range from $2.7 billion to about $4.9 billion, according to six analysts’ estimates compiled by Bloomberg.
Many of Time Inc.’s magazine rivals are closely held, including Conde Nast, the New York-based publisher of Vogue and Vanity Fair that’s owned by Advance Publications Inc., and Hearst Corp., the publisher of Cosmopolitan.
Time Warner executives are looking at starting Time Inc.’s debt at about three times its annual operating income, which would amount to about $1.2 billion, two people familiar with the discussions said earlier this year.
By contrast, News Corp.’s publishing business, which includes the Wall Street Journal and other newspapers, started with $2.6 billion in cash and no debt when it split off in June.
The separation of Time Inc. marks Time Warner’s third major spinoff since Bewkes became CEO in 2008. Time Warner Cable Inc. (TWC), the second-largest U.S. cable company, became independent in March 2009, while AOL Inc. was spun off later that year.
Time Inc.’s sales have fallen in five of the past seven years, making it the biggest laggard among Time Warner’s divisions. The unit’s revenue of $3.4 billion in 2012 represented more than 11 percent of Time Warner’s total sales, according to data compiled by Bloomberg.