These figures demonstrate that, in the Middle East, the overwhelming majority of divestitures are created through share sales; corporate
spin-offs, on the other hand, are not a common way to create value, especially within diversified holding companies in the region," said Ihab Khalil, Partner and Managing Director at BCG Middle East.
A
spin-off is the creation of an independent company through the roll-over of an existing business/division of a company to a new legal entity.
Different types of corporate
spin-offs have different founding conditions.
We compare these "sponsored"
spin-offs to "conventional"
spin-offs in terms of long-run stock performances, return on assets (ROA), growth opportunities, capital expenditures, and earnings per share (EPS).
Shane describes this phenomenon as
spin-offs based on intellecutal capital developed at an academic institution.
Previously, such so-called comfort rulings were available to resolve questions such as (i) whether a
spin-off has an adequate corporate business purpose, (ii) whether a
spin-off will be regarded as used principally as a device for the distribution of earnings and profits, and (iii) whether a
spin-off and any prior or subsequent acquisition of stock in the Parent or the Spinco are part of a plan under section 355(e).
2002-49, another important ruling on the active trade or business requirement of a
spin-off.
Notwithstanding the compelling corporate business objectives of Fortune Brands'
spin-off of Gallaher, the transaction probably would not have been undertaken had the proposed regulation been finalized before the deal was concluded.
The formation of the new subsidiary provides a vehicle to consummate a transaction,
spin-off an asset to our shareholders and/or to facilitate the financing of such a transaction".
1) A number of related provisions and conforming amendments were adopted at the same time, the cumulative effect of which is to revise substantially the conditions for obtaining a tax-free separation -- whether as a
spin-off, split-off, or split-up(2) -- of one corporation from another pursuant to section 355.
25, Accounting for Stock Issued to Employees, when employers change the provisions of stock option plans following a
spin-off or recapitalization.
Why have some of the nation's most prominent corporations engaged in
spin-offs and split-offs?
