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Time Warner Completes Time Inc. Spinoff

Zacks Equity Research

Time Warner Inc. (TWX) announced that it has concluded the spin-off of its subsidiary Time Inc.  Following the news, shares of the newly formed company Time Inc. (TIME), slid 0.8% fueling concerns about the company’s growth prospects as the secular headwinds loom large over the print media industry. However, shares of Time Warner rose 1.2% on the index.

As a part of the deal, Time Warner’s shareholders’ got one share of Time Inc. for every eight shares of Time Warner. The company will pay dividends on the shares of Time Inc. as the spin-off closes officially. The dividend payment will be made on a pro rata basis, previously approved by the parent company’s board.

Notably, when the company declared completion of the Time Inc. spin off, rumors of its plan to acquire a stake in Vice Media Inc. started surfacing.

The company first announced its plan to spin-off Time Inc. in Mar 2013 after the deal with Meredith Corp. (MDP) to create a magazine-based company failed to materialize. Time Warner, for long, was contemplating on selling off its magazine unit as it was not yielding profits. The inclination of consumers toward digital media has had a profound impact on the print media.

Management believes that offloading Time Inc. would allow it to concentrate purely on television networks and film and TV production businesses.

Time Inc. is the latest in the series of divestments by the parent company. Earlier, Time Warner Cable (TWC) and AOL Inc. (AOL) were spun off from Time Warner into independent companies.

Time Inc., which includes brands such as People, Sports Illustrated, InStyle, Time, Real Simple and Fortune, faces a serious challenge as the company takes off on its own. However, CEO Joseph A. Ripp is confident about a turnaround and has maintained that it might take time but it is not impossible.  

Time Warner carries a Zacks Rank #3 (Hold).

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