Time Warner Inc.'s and Time Warner Cable Inc.'s boards of directors approved on Wednesday an agreement that will split the companies legally and structurally.

Under the agreement, Time Warner, which owns 84 percent of the unit, said it would receive $10.27 for each Time Warner Cable share. The cable company plans to borrow $10.9 billion to fund the entire payout.

Time Warner will receive $9.25 billion as a result of this dividend.

The news sent shares of Time Warner up 0.9 percent to $16.29, and shares of the cable unit rose 3.6 percent to $31.32, in early trading Wednesday.

Time Warner said it will exchange its 12.4 percent stake in Time Warner New York Cable Holding Inc., a subsidiary of Time Warner Cable for 80 million newly issued shares of Time Warner Cable's Class A common stock.

The world's largest media company said it will also convert its Time Warner Cable Class B common shares into Time Warner Cable common shares.

This is the right step for Time Warner and Time Warner Cable stockholders, the Time Warner chief executive, Jeffrey Bewkes said in the statement Wednesday. We're bullish on Time Warner Cable's prospects, but its strategic goals and capital needs are increasingly different from those of our other businesses.

On a conference call, Bewkes said, We do think we've got very good secular growth prospects and we will be growing faster than I think is currently realized in the market, adding all of our businesses on our content side, including publishing, have opportunities to grow faster.

The deal is expected to close in the fourth quarter of 2008.