Strategy and Financial Analysis

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Strategy and Financial Analysis

Questions One

The spin-off is justified by the financial modeling surrounding relative growth and profitability of the units involved achieved by giving Time Warner Plc. great focus. The spin-off move would allow Time Warner to media conglomerate to focus resources and attention on film and cable television business which are the core operations of the company. Time Inc. serves as the largest publishing business in terms of advertising costs in the USA, making a Time Warner group to have high diversification which halts quality, understanding of customers and overall limits the ability of the company maximize the wealth of the shareholders. Strategically, spin off helps Time Warner to understand its customers better by focusing on one market, which will result in better performance (Healy & Palepu, 2012). Time Inc. registered declining financial performance lagging behind Time Warner’s earnings. Spinning off helps Times Warner to unload the unit (Times Inc.) that have dragged its growth.

The market patterns are changing where people prefer ‘screen’ to ‘print’ which has seen the print advertising decline especially with the growth of the internet and the Internet-related technology. Spin off helps Times Warner to avoid future challenges that a print media is predisposed to stemming from a reduction in printing advertisements, a problem with monetizing the mobile devises and a high decline in newsstand sales. As such, spin off helps the Warner Time management alleviate future management problems between the Times Inc. and Warner times because of the different business environment and lines of the two companies. Time Warner cannot offer the kind of financial, management and the resources support required by Warner Inc. to have continuous growth Grant, 2015). The helps Times Warner to take advantage of tax benefits where it considers the spin-off to qualify for non-recognized loss and gains under the section 355 of IRS 1986.

Question Two

Before the spin-off, the consolidated stock price traded at $65.61. By spinning off Times Inc., Times Warner aim is to