Time Warner Inc. (NYSE: TWX) and Time Warner Cable Inc. (NYSE: TWC) have finally announced approval of an agreement that will result in the complete legal and structural separation of the two companies.

Here are the guts of the deal:

• Time Warner exchanges its 12.4% interest in TW NY Cable Holding Inc., a subsidiary of Time Warner Cable, for 80 million newly issued shares of Time Warner Cable's Class A common stock, increasing Time Warner's ownership stake in Time Warner Cable's common stock from 84% to 85.2%;
• Time Warner Cable declares a one-time dividend of $10.27 per share for a total of about $10.9 billion payable immediately prior to completion of the separation;
• Time Warner receives $9.25 billion from this dividend;
• Time Warner Cable expects to fund the one-time dividend through its existing revolving credit facility and $9 billion from a new, committed two-year bridge term financing from a syndicate of banks;
• Time Warner converts its Time Warner Cable Class B common shares (each Class B common share has the voting power equivalent to 10 Class A common shares) into Time Warner Cable common shares on a one-for-one basis in a recapitalization that results in Time Warner Cable having one class of common stock;
• Time Warner will distribute its entire ownership stake in Time Warner Cable to Time Warner stockholders in a tax-efficient manner; the exact form of the distribution will be determined shortly before the closing of the transaction, based on market conditions.

This should be the start of that value unlock, and this will also clarify the balance sheets of both companies.

In a recent newsletter article, I generated an $18 scenario with a $20 target on a slightly enhanced basis. In early to mid 2009 as the economic slowdown should have been worked through, I even see a $22 to $24 upside scenario.

Jon Ogg is the editor of 24/7 Wall St.'s Special Situation newsletter.

It appears that Time Warner Inc. (NYSE: TWX) may actually be considering a sell-back of a small stake in Time Warner Cable (NYSE: TWC) according to an Associated Press report from last night.

This morning Reuters added some information. The board of directors of Time Warner Cable appointed a special committee to look into any proposal that Time Warner might make on its 12.43% stake. This stake was valued at roughly $2.9 billion back in 2005. If this occurs, it will be financed from the Cable company's revolving credit facility or by accessing debt. Time Warner would apparently still hold an 84% stake in the cable operator if the filing information is accurate.

But there is another thought here. It may be a bit Panglossian, but still worth a visit. Time Warner Inc. probably has a second wave of a restructuring in the not too distant future, or so I have speculated (actually, I believe it inevitable and as logical as Ireland being green). Shares of Time Warner Cable are down to $32.79, down from $43.25. The cable company should not take on the debt. The average daily trading volume is barely 1.2 million shares (about $40 million worth of stock trading per day). Its rival Comcast Corp. (NASDAQ: CMCSA) trades close to 20 million shares per day (over $400 million worth of stock).

The company could allow these to make the necessary conversions and it could be added to the free float on the exchange. While it is dilutive to existing shareholders, it would at least get that low float higher. Its $29.6 billion in market cap is far lower if you consider the free float in the stock.