Is Time Inc. better on its own?

Mar 07, 2013

Dan Primack was a senior editor at Fortune from 2010 to 2016. He was also the author of Term Sheet, Fortune's daily newsletter about deals and dealmakers.

Time Warner CEO Jeff Bewkes

FORTUNE -- Time Warner announced Wednesday that it plans to cut its Time Inc. magazine unit loose, spinning it off into an independent public company. There are all sorts of details yet to be worked out, but the largest question is whether this deal will actually work. And, by that, I mean create additional value.

Time Inc. would become the third major Time Warner (twx) unit to be spun out as an independent company, following Time Warner Cable (twc)  in 2007 and AOL (aol) in December 2009. The three businesses don't have much in common beyond an estranged parent, but perhaps we can determine a theoretical pattern:

Time Warner Cable: More valuable today.

  • Time Warner Cable began trading as an independent company on March 1, 2007. Its opening share price on that day was $36.87, compared to an opening price today of $89.13 per share. Its market cap has increased from $11.7 billion to $26.4 billion.
  • Time Warner Cable's 2006 revenue was $11.77 billion, which represented a 33.5% increase over 2005. Its 2012 revenue was $21.39 billion, or an 8.7% bump over 2011.
  • Net income was $1.98 billion in 2006 (up 16.8% over 2005), compared to $2.16 billion in 2012 (up 10.1% over 2011).

AOL: More valuable today.

  • AOL began trading as an independent company on Dec. 10, 2009. Its opening share price on that day was $29.39 per share, compared to an opening price today of $37.27 per share. The market cap has increased from $2.48 billion to $2.87 billion.
  • AOL's 2009 revenue was nearly $3.3 billion, which represented a 21.8% decline from 2008. Its 2012 revenue was $2.2 billion, which was off half a percentage point from 2011.
  • Net income increased from $248 million in 2009 (up 7.7% over 2008) to a whopping $1.05 billion in 2012 (up 47.5% over 2011).

Time Warner: Mixed bag

  • Time Warner had a $77.2 billion market cap when it spun out Time Warner Cable, and a market cap of $36.1 billion when it spun out AOL. Its current market cap is around $51.8 billion, although the three companies added together are valued at $81.07 billion.
  • Time Warner revenue for 2012 was $28.7 billion, compared to $43.69 billion (2006) before the TWC spinout and $25.3 billion (2009) before the AOL spinout. Net income was $6.55 billion in 2006, $2.47 billion in 2009 and $2.88 billion last year.

Again, we're talking about magazines this time around -- not cable television nor pure digital content. And the above statistics are points in time that may have been influenced as much by macro market conditions as by the actual underlying businesses. But there is at least some historical reason to be optimistic that Time Inc. might do better on its own than as part of Time Warner.

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