Time Warner is spinning off Time Inc.

Time Warner is leaving the magazine business.

The company will spin off Time Inc., its struggling magazine division, into its own separate, publicly traded company rather than selling off many of its assets and hanging onto a few top titles.

The decision, announced yesterday, came after months of talks between Time Warner and Meredith, the nation’s second largest publisher, over a deal that would have seen Meredith acquire the bulk of Time Inc.’s publications.

That deal would have left Time Warner with Time, Sports Illustrated, Fortune and Money.

But ultimately the company decided it would rather exit the money-losing magazine industry entirely.

“After a thorough review of options, we believe that a separation will better position both Time Warner and Time Inc.,” said Time Warner chairman Jeff Bewkes in a statement.

“A complete spin-off of Time Inc. provides strategic clarity for Time Warner Inc., enabling us to focus entirely on our television networks and film and TV production businesses, and improves our growth profile. Time Inc. will also benefit from the flexibility and focus of being a stand-alone public company and will now be able to attract a more natural stockholder base.”

Laura Lang, who joined Time Inc. as chief executive officer last year, will stay with the company through the transition and then take her leave.

Time Warner has been divesting itself of non-core business for years, splitting with AOL and selling off Time Warner Cable, Warner Music Group and Time Warner Book group.

It reflects a greater industry trend of separating out publishing interests, which have been a drag on corporate profits. News Corp., for instance, is spinning off its own print unit later this year.

Time Inc. has been struggling for some time. Revenue has dropped by nearly a third over the past five years, thousands of employees have been laid off, and advertising and circulation for many of its titles are down.

Meredith yesterday acknowledged that it had been in talks with Time Inc. Some had found the potential pairing of Time Inc., the world’s largest publisher with slick brands like People and InStyle, an odd fit with Meredith, known for the folksy appeal of publications like Better Homes & Gardens and Family Circle.

But ultimately the stumbling block was Time Warner’s desire to exit publishing entirely.

Time Warner would have received more than $1 billion in the deal, but it still would have been saddled with the four core titles that Meredith was not interested in, forcing the company to stay in a business that it no longer wanted.

Spinning off the division and getting rid of every title ultimately made more sense.

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