Time Warner to Offload Magazine Unit in Third Major Spinoff
Time Warner Inc. (TWX) will spin off its magazine business later this year, turning the nine-decade-old publisher of Time, People and Sports Illustrated into a separate publicly held company.
The board authorized management to proceed with the plan after a review of options, the New York-based media company said yesterday in a statement. As part of the move, Time Inc. Chief Executive Officer Laura Lang will step down from the role.
“A complete spinoff 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,” Jeff Bewkes, CEO of the parent company, said in the statement. “Time Inc. will also benefit from the flexibility and focus of being a stand-alone public company and will now be able to attract a more natural stockholder base.”
The move represents Time Warner’s third major spinoff since Bewkes became CEO in 2008, letting the company focus on faster-growing businesses. Time Warner Cable Inc., the second-largest U.S. cable company, became independent in March 2009. Time Warner spun off AOL, the dial-up Internet service that is remaking itself as a Web publisher, later that year.
Time Warner’s magazine assets have an enterprise value of $3.3 billion, Anthony DiClemente, an analyst at Barclays Plc in New York, said today in a report.
The spinoff decision follows an attempt to divest some of Time Warner’s magazines to Meredith Corp., the Des Moines, Iowa-based publisher of Better Homes and Gardens. The two companies had discussed a deal that would pair Time Inc.’s lifestyle and entertainment magazines with Meredith’s women-oriented lineup, which includes Family Circle and 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. In that scenario, other Time Inc. publications, such as Time and Fortune, would have stayed with Time Warner. The talks faltered after Time Warner decided it wanted to unload all 21 publications at once, the person said. That led the company to push ahead with the full spinoff of Time Inc.
Shares of Time Warner rose 2.4 percent to $56.78 at the close in New York. The breakdown of the Meredith deal took a toll on that company’s stock. It dropped 6.2 percent to $37.82.
Meredith said yesterday that it remains opened to talks.
“There are natural synergies between our two portfolios; however, we respect Time Warner’s decision and certainly remain open to continuing a dialogue on how our companies might work together on future opportunities,” Meredith CEO Stephen Lacy said in a separate statement.
Time Inc. has posted sales declines in five of the last seven years, making it the biggest laggard among the company’s divisions. Revenue fell 6.6 percent to $3.44 billion last year, reflecting broader declines across the U.S. magazine industry.
The slowdown has put pressure on companies to divest print-media assets. News Corp. (NWSA) CEO Rupert Murdoch, who built his media empire on newspapers, agreed last year to split slower-growing publishing businesses from his more valuable television and film operations. News Corp.’s trove of newspapers, which includes the Wall Street Journal and the New York Post, will become a separately traded public company by June.
The Time Inc. spinoff would rid Time Warner of its original business, ending its long history in magazine publishing. Time Inc., which was founded by Henry Luce and Briton Hadden in 1922, became the foundation for Time Warner, one of the largest media companies in the world. After entering the television business, the company eventually acquired a controlling stake in movie studio Warner Communications in 1989 and became Time Warner the following year.
Bewkes has a background in television, having started at Time Warner (TWX) at its HBO cable channel. After climbing the ranks to CEO of that division, he became chief operating officer of the parent company and then CEO.
Lang, meanwhile, became Time Inc.’s CEO in January 2012 after working as an advertising executive. She will stay with the company until a successor is found.
“I have decided that taking the company through a transition to the public markets is not where my passion lies,” she said in a note to staff. “Jeff has been extremely supportive and I am committed to working together with him on recruiting the right person to lead Time Inc. at the spin.”
Time Inc., the largest U.S. magazine publisher, has struggled to shift from print to the Internet, where ads command lower rates.
“Although change can be unsettling, I am confident that you have the fortitude to stay focused on what Time Inc. does better than anyone: produce great journalism that your readers and audiences love,” Bewkes said in a memo to employees. “That great legacy will live on as Time Inc. embarks on this new journey as a publicly-traded company.”
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