Time Warner to spin off its magazine unit

The company makes the move after talks to merge with Meredith Corp. collapse.

Time Warner will spin off its Time Inc. magazine unit — home to such titles as Time, People, Sports Illustrated and Fortune — into a separate, publicly traded company.

The move comes after the collapse of talks to merge Time Inc. with Meredith Corp., another magazine publisher.

“After a thorough review of options, we believe that a separation will better position both Time Warner and Time Inc.,” Time Warner Chief Executive Jeff Bewkes said Wednesday, adding that the restructuring will allow the company to “focus entirely on our television networks and film and TV production businesses” and give Time Inc. “the flexibility and focus of being a standalone public company.”

The talks with Meredith, which became public in recent weeks, fell apart over disagreements on the valua- tion of the magazines and how much debt the new company would carry, according to a person close to the situation.

Time Warner’s decision to get smaller echoes a recent move by another media giant. News Corp. is also spinning off its publishing holdings from its more lucrative film and TV businesses and folding them into a separately held public company.

The move marks the end of an era for the company. Founded in 1922 by Henry Luce, Time Inc. started as one magazine and grew into an empire of more than 100 titles. Along the way it created the pay cable channel HBO, and swallowed Warner Communications and Turner Broadcasting.

But the magazine industry has been struggling for years, and sentimentality wasn’t enough for Bewkes to keep Time Inc. In 2012, Time Inc. had revenue of $3.4 billion, a decline of 7%. Operating income fell 25% to $420 million.

Time Inc. Chief Executive Laura Lang, who took the job only a year ago, will leave the company. In a memo to Time Inc. staffers, Lang said that “taking the company through a transition to the public markets is not where my passion lies.”

The spinoff of Time Inc. is the latest move by Bewkes to shed the company of its nonTV and film holdings. Since becoming chief executive of Time Warner in 2008, the company has gotten rid of its cable systems and AOL.

The shrinking strategy is an about-face for an industry that used to believe bigger was better. Time Warner merged with America Online in 2000 in a deal that was valued at $160 billion. But the marriage of old and new media was a bad fit, and caused huge losses. Time Warner unloaded AOL in 2009.

Despite the fact that there will no longer be a Time in Time Warner, the company said it has no plans to change its name. Besides Warner Bros., Time Warner’s assets include Turner Broadcasting, home to cable networks CNN, TNT and TBS, and the pay cable channel HBO.

Time Warner said the spinoff should be completed by the end of the year and will be tax free to its shareholders.

joe.flint@latimes.com