Time Warner to Spin Off Time Inc.

By Bill Mickey

After weeks of reported negotiations, Time Warner Inc. abruptly ended talks on March 6 to combine most Time Inc. titles with Meredith Corp. into a new company and is instead announcing that it will spin off all of Time Inc. (led by the Time flagship) as a separate, publicly traded company. The separation is expected to be finished by the end of the year.

In the meantime, Time Inc. CEO (since Jan. 2012) Laura Lang has decided to step down following the transaction.

"After a thorough review of options, we believe that a separation will better position both Time Warner and Time Inc.," says TW chairman and CEO (since Jan. 2008)  Jeff Bewkes in a statement. "A complete spin-off 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, and improves our growth profile. 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. As we saw with the prior spin-offs of Time Warner Cable and AOL, we expect the separation will create additional value for our stockholders.”

According to the announcement, Lang notified Bewkes that she wanted to step down. “Laura indicated to me that we should find a different kind of CEO for this new public company, and I respect her decision,” says Bewkes.

In a separate announcement Wednesday, Meredith Corp. confirmed the discussions, indicating the deal was initiated by Time Warner. "At Time Warner’s initiation, we discussed combining our National Media Group with certain Time Inc. brands to create a new publicly traded company. 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."

Bill Mickey is editor of min sister publication Folio:. The article was first posted on FolioMag.com.

(observation from min editor-in-chief Steve Cohn)
Although Time Warner CEO Jeff Bewkes is confident that a spun-off Time Inc. will "thrive independently" as earlier TW spinoffs Time Warner Cable and AOL have, the one being put out on its own in a corporate break-up is usually the weakest asset. That could potentially mean that Bewkes will sell Time Inc. before the spin-off is completed by year-end.

A recent precedent was McGraw-Hill Cos. CEO Harold ("Terry") McGraw III separating MH Education from the more lucrative MH Financial (Standard & Poors, etc.) with intentions of forming two companies–until last November, when Apollo Global Management agreed to pay $2.5 billion for MH Education. The deal is expected to close as scheduled by the end of March.

An Interesting wrinkle was Meredith Corp. president/CEO Steve Lacy admitting through a corporate statement that Meredith was in discussions to buy Time Inc.’s Style and Entertainment (People, Entertainment Weekly, InStyle, etc.) and Lifestyle (Real Simple, Southern Living, etc.) groups. This is unusual, because prospective buyers rarely comment until the deal comes to fruition.

But will all the variables that will come with the Time Inc. spinoff, Meredith again being a player is not completely out of the question. In that scenario, Lacy is looking forward, not behind.

(statement from outgoing Time Inc. CEO Laura Lang)
March 6, 2013

To: Time Inc. Employees
From: Laura Lang
Re: Today’s News

Today’s news that Time Warner plans to spin off Time Inc. is something that everyone is just beginning to digest. While there are many questions that can only be answered in time, one thing is already clear: the hard work we have done over the past year in maintaining our core business while at the same time becoming more digitally focused has positioned the company well. Time Inc. has incredible talent and great brands that will continue to lead our industry.

The planned spin-off has also made me reflect on what is the best path for me and the company going forward. After considerable thought, I have decided that taking the company through a transition to the public markets is not where my passion lies. 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.

I want to thank all of you for your support over the past year. You welcomed me warmly and jumped in enthusiastically as we charted a course. I look forward to working with you as we continue to make progress.


(statement from Time Warner Inc. CEO Jeff Bewkes)
March 6, 2013

To: Time Inc. Colleagues
From: Jeff Bewkes

Subject: Time Inc.’s Separation from Time Warner

I want to share with you the news that our Board of Directors has authorized us to proceed with a plan that will result in Time Inc. being an independent, publicly traded company.

Time Inc. is a great and accomplished journalistic institution, the undisputed leader in its industry, and home to some of the best brands and most talented people in media. Under the proposed structure, none of that will change and all of Time Inc.’s magazines will stay in the portfolio. This decision comes after a thorough review of options that would position Time Inc. for the most attractive growth opportunities while also best serving the interests of Time Warner Inc. and our shareholders. As you know, Time Warner successfully completed similar separations in the past few years with Time Warner Cable and AOL. Both of those companies have thrived independently, and I anticipate the same for Time Inc.

We expect to complete the spin before year-end, and management will share more details of what that means for the company and for you as soon as they are available. Laura has suggested to me that we find another CEO for the new public company, and I have agreed. She will however be staying on through this process and leading Time Inc. as it prepares to become a stand-alone company and helping me and Time Warner management on the CEO search. Laura has been a great partner who has given Time Inc. forward momentum over the past year, and I want to express my deep gratitude for her leadership.

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. That great legacy will live on as Time Inc. embarks on this new journey as a publicly-traded company.