October 30, 2014
2011 was a great year for spin-offs. Seventy-two deals were announced, including three of the largest U.S. transactions of all time: AbbVie (#1, $56 billion), Kraft Foods Group (#2, $26 billion), and Phillips 66 (#7, $22 billion). To all appearances, the spin-off market, decimated by the financial crisis of 2008, was back. 2012, however, with only $30 billion in completed transactions, seemed to signal that 2011 was a fluke, rather than a harbinger. But in 2013 spin-offs came back, again. Seventy-seven deals were announced, although, at $39 billion, the value of completed transactions fell well short of 2011’s $100 billion apogee. Data from 2014 suggests that the spin-off renaissance is continuing. Sixty-two deals have been announced thus far. More importantly, several deals are very large. None of the announced transactions will top AbbVie, but the bifurcation of Hewlett-Packard and eBay’s distribution of PayPal will likely be among the largest US spin-offs since 2005.
Largest Completed U.S. Spin-Off Transactions, 2005 – 2013
|Target Name||Announc. Date||Transaction Value (USD)|
|Abbott Laboratories-Research- Based Pharmaceuticals||10/19/11||55,513,051,000.00|
|Kraft Foods Inc||1/31/07||51,004,959,000.00|
|Time Warner Cable Inc||4/30/08||34,569,110,000.00|
|Viacom Inc-Cable Network Business||6/14/05||32,098,415,000.00|
|Kraft Foods Inc-North American Grocery Business||8/4/11||26,084,729,000.00|
|Tyco Healthcare Group Ltd||1/13/06||22,798,258,000.00|
|ConocoPhillips Co-Refining & Marketing Business||7/14/11||21,529,075,000.00|
|Tyco Electronics Ltd||1/3/06||19,254,616,000.00|
|Duke Energy Corp-Natural Gas Transmission Business Unit||6/28/06||17,962,986,000.00|
|Discover Financial Services||12/19/06||15,097,555,000.00|
In 2014, a number of large companies elected to spin off small business units. Comcast, for instance, announced its intention to shed 2.5 million mid-western subscribers (slightly more than 1% of total subscribers) by forming a new public entity called GreatLand Connections. Hess Corp announced the spin-off of its retail arm, but abandoned its plan when Marathon Petroleum agreed to acquire the business. The Hess transaction highlights the historical tendency of many announced spin-offs to remain unexecuted.
Some small spin-offs were of profitable units – e.g. Kimberly-Clark’s Halyard Health, and National Oilwell’s NOW Inc., Several were units in new industries, easily identified by their trade mark-friendly names:
Nuvola: smart home solutions
Enova: electronic payments
Vectrus: military technology solutions
Also distributed were a number of old industry businesses, including the newspaper operations of Gannett Co., EW Scripps, and Journal Holdings. Over the last five years, media units have been frequent spin-off candidates, as have technology, financial services, and bio-pharmaceutical businesses.
Finally, 2014 saw a number of spinoffs that amount to nearly equal splits, including the aforementioned division of HP, Agilent’s spin-off of Keysight (43% of revenue), Baxter International’s distribution of its biopharma business (43% of sales), and eBay’s spin-off of PayPal (38% of revenue).
Data for this survey was compiled using:
The Business Law Center and
What’s Market, Spin-Offs