Divestitures: Creating Value Through Strategy, Structure, and Implementation

CHAPTER 6

Spinoffs

INTRODUCTION

Spinoffs^* are a divestiture structure in which a company distributes shares in a subsidiary to its existing shareholders.^† This results in the creation of a new, independent, public company, as illustrated in Exhibit 6.1 (two related divestiture structures, split-offs and split-ups, are discussed in a nearby text box). Spinoffs separate the ownership, operations, and valuation of the spinoff company from those of its former parent. Although the divested subsidiary is owned by the parent company until the moment the spinoff is complete, the shareholder bases of the former parent and newly liberated subsidiary will promptly diverge after that, as investors in the two companies independently trade shares, as arbitrageurs ...