FCC Blesses Time Warner Split
The plan, announced in May, calls for Time Warner Inc. to spin off its 85.2 percent stake in the MSO. That deal was expected to close by the end of last year as TWC ironed out a raft of change-of-control franchise agreements.
TWC is on the hook to pay a one-time $10.27 per share special dividend to TWC shareholders, with $9.25 billion in cash going to Time Warner Inc. TWC's payment is already fully funded. (See Time Warner Cable Leaving the Nest.)
TWC did not indicate when the split will occur, but it could be completed "within a few weeks," wrote Sanford C. Bernstein & Co. Inc. analyst Craig Moffett in a note distributed this morning. "At the very least, the announcement essentially removes the last remaining doubt that the separation – and payment of the attendant special dividend – will be completed before the end of the quarter."
Several networks, along with Dish Network LLC (Nasdaq: DISH) and RCN Corp. , urged the FCC to impose programming-related conditions on the deal. The concern was that Time Warner Inc. and the MSO could engage in discriminatory rate structures for "must have" programming. Among its media properties, Time Warner Inc. owns HBO, TNT, and CNN.
The FCC rejected adopting such a condition, holding in its "Memorandum Opinion and Order" that neither TWC or Time Warner Inc. "will be able to exert significant influence over the core operations of the other" following the split. "Although Time Warner and TWC will have shareholders in common, there will be no overlap of officers or directors," the Commission reported.
Time Warner Cable shares were down 36 cents (2%) at $18.16 in midday trading Wednesday. Moffett rates TWC shares at "Outperform" with a target price of $33, holding that the stock is available on the cheap these days.
— Jeff Baumgartner, Site Editor, Cable Digital News