Time Warner and Time Warner Cable said Wednesday they would split into two companies and pay Time Warner Cable shareholders a one-time $10.9 billion dividend.
The move comes after pressure from investors for Time Warner to streamline its focus as a pure media content company and rescue its stock price.
The news lifted Time Warner shares by more than 3 percent in pre-market activity on the New York Stock Exchange.
Time Warner will exchange its 12.4 percent interest in TW NY Cable Holding , a subsidiary of Time Warner Cable , for 80 million newly issued shares of Time Warner Cable's Class A common stock.
This will increase Time Warner's ownership stake in Time Warner Cable's common stock from 84 percent to 85.2 percent.
Time Warner Cable's one-time dividend of $10.27 per common share - a total of about $10.9 billion - will be payable immediately prior to completion of the separation. Time Warner will receive $9.25 billion of this dividend.
Time Warner Cable expects to fund the special dividend through its existing revolving credit facility and $9 billion from a committed two-year bridge term loan from a syndicate of banks.
Time Warner also agreed to provide a commitment for a supplemental two-year term load of up to $3.5 billion to enable Time Warner Cable to repay the bridge.