By Dan Weil, Senior Writer, Institutional Investor:
Whether driven by activist investors or a desire to maximize value, spin-offs are gaining steam this year. Corporations are going all out to boost their share prices, often at the behest of activist investors. And one method they are using to raise valuations is spin-offs. The biggest such deal so far has been eBay’s $49.2 billion spin-off in July of PayPal Holdings Other major spin-offs this year include the $17.2 billion separation of pharmaceuticals company Baxalta from Baxter International. The new company is already fielding a $30 billion takeover attempt from Ireland-headquartered pharmaceuticals company Shire.
Another reason for corporations to split off divisions into separate companies is that spin-offs may provide peace of mind. For companies whose earnings are struggling, spin-offs can “create a calmness for shareholders” if it’s a company whose units don’t have synergies, says Jonathan Morgan, London-based deals analyst and head of research at Edge Consulting Group, an equity research firm focusing on spin-offs.