Divestitures: Creating Value Through Strategy, Structure, and Implementation

CHAPTER 8

Hybrid Divestiture Structures: Joint Ventures and Tracking Stocks

INTRODUCTION

This chapter considers the two final divestiture structures addressed in Part II: joint ventures and tracking stocks. In a joint venture, a divesting company combines one of its businesses with that of a synergistic counterparty. While each of the co-venturers receives an equity stake in the new entity, the divesting company reduces its stake over time, allowing it to exit from its former business. In a tracking stock, a company issues shares that are tied to the performance of one of its subsidiaries, essentially selling interests in that subsidiary’s future earnings and liquidation value. This allows investors to trade shares in the tracking stock based ...