Time Warner leaning to spin-off method for AOL

Time Warner CEO Jeffrey Bewkes said that his company is still leaning toward spinning off AOL to shareholders as the preferred method for divesting the struggling Internet unit. He said forms of separation being considered include a split-off, spin-off or a combo. A spin-off would see Time Warner distribute the stock it owns in AOL on a pro rata basis to its shareholders, similar to a dividend distribution. As widely expected, Time Warner confirmed it would separate AOL as an independent, publicly traded company. Bewkes told Sanford Bernstein's Strategic Decisions Conference AOL will be setting up its own board and other requirements for a public company over the next six months in time to complete the separation. He said it is possible that company takes on some debt once it gets spun off, depending on the planned capital structure and the assets that remain with the independent business. "It has pretty healthy cash flow so theoretically it could support some debt if that looked advisable once the final structure is settled," said Bewkes. Wall Street had long speculated Time Warner would break up AOL into its adv & content unit and its dial-up Internet access unit ahead of a separation. AOL's dial-up Internet access, once a primary way Americans connected to the Internet, is now a shrinking business as most subscribers dropped it for faster services from phone & cable companies. But Bewkes said his management had decided that it was more efficient to spin off the company as one unit rather than go through a break-up process. "It wasn't a good use of time & distracts too much not only management but our business partners," said Bewkes. "It wasn't as important as getting the management out in one piece." Media conglomerate Time Warner owns major media brands like cable networks CNN & TNT, as well as Hollywood studio Warner Bros. After spinning Time Warner Cable in March it became more focused on its content businesses which also includes publishing unit Time. Time Warner, like other media companies, has been hit by the economic recession which has badly hurt global ad sector. Last quarter, its management said the 2009 profit outlook was for flat growth. He said the difficult market conditions stabilized for his company. "We're feeling relatively good in the media sector compared to competitors," said Bewkes.