Christopher R. Pavese, CFA  Broyhill Case Study: Time Warner Value Creation

 

Throughout history, media tycoons have had two choices for survival: buy or be bought. Of course, there are exceptions to every rule: Jeff Bewkes, Chief Executive Officer of the once sprawling Time Warner media empire, hardly fits the mogul mold.

With the AOL-Time Warner “deal of the century” in his rear-view mirror, Time Warner has generated significant returns with Bewkes at the helm by pulling three levers: optimizing its cost structure, highlighting value in subsidiaries through spinoffs, and buying back shares.

We believe his actions were a logical counterbalance to the era of empire building that preceded him. He was dealt a messy hand comprised of several divisions whose substantial values were obscured by the overhang from an ill-conceived merger and poorly executed integration. Bewkes pursued the unglamorous and often thankless task of breaking apart that empire. His shareholders have him and his team to thank for it.

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