Public Company Spin-Off Transactions

Article by Stephen J. Fyfe , Kim McGarrity and Stephanie Wong

Corporate spin-off transactions have again become a preferred structure for companies to release shareholder value and achieve other business purposes. In a spin-off, the parent corporation (Pubco) divides the assets and liabilities of the firm and chooses the capital structure for the new stand-alone entity (Spinco).

Pubco may undertake a spin-off transaction to distribute corporate assets to its shareholders for various reasons. For example, Pubco may decide to divest itself of a business that becomes incompatible with, or diverts resources away from, its core business operations. Apart from allowing Pubco to focus on its core business activities, spinning off non-core business assets may enhance Pubco's ability to obtain financing for its remaining business segments, and increase Pubco's attractiveness to investors interested only in its core business. Spinning off distinct business operations