New York, May 21 (DPA) Time Warner, the world's largest media company, is to spin off its lucrative Time Warner Cable unit in a $10.9-billion deal.
As part of the separation, Time Warner Cable has declared a one-time dividend of about $10.9 billion to stockholders, $9.25 billion of which will go to Time Warner, which owns some 85 percent of the cable company.
Time Warner is expected to use the windfall to repurchase its own stock and boost its share price. Investors had long been clamouring for a split, arguing that Time Warner needed to focus on its core entertainment brands.
"Separating the two companies ... will help their management teams focus on realizing the full potential of the respective businesses and will provide investors with greater choice in how they own this portfolio of assets," Time Warner CEO Jeff Bewkes said in a release.
"We're bullish on Time Warner Cable's prospects, but its strategic goals and capital needs are increasingly different from those of our other businesses," he said.
The companies had announced plans for the split last month. They hope to close the deal in the fourth quarter.
For Time Warner Cable, the No. 2 US cable-TV-service provider, the deal increases its "ability to compete aggressively and perform well in a highly competitive environment by delivering the innovative telecommunications services that our customers need," CEO Glenn Britt added in a statement.
However, the company faces growing competition from phone companies like Verizon Communications and AT&T as those companies try to expand into the pay-television sector.