“Our dialogue remains quite high with respect to additional potential strategic spins, and I would expect that the current cycle is far from done,” said Mark Schwartz, Ernst & Young’s Americas IPO and SPAC advisory leader. However, he said, “not all spins are created equal.”
In the case of GE, for example, its shares have risen 36 per cent since the company announced plans to form three different companies in November 2021. That’s in addition to a roughly eight per cent gain for its already separated health unit — GE HealthCare Technologies Inc. — since its December debut. Meanwhile, Fortune Brands Innovations Inc.’s separation of MasterBrand Inc., also in December, has fuelled a return of more than 20 per cent for both stocks.
More recently, Kenvue Inc. — carved out from Johnson & Johnson in May — has struggled to win investor confidence despite a portfolio of well-known products including Listerine and Tylenol. It’s also facing exposure to lawsuits related to Tylenol, and some analysts see its US$40-billion valuation as limiting the stock’s upside.
More broadly, the Bloomberg U.S. Spin-Off Index has returned 45 per cent over the past four years, trailing a return of almost 60 per cent for the benchmark S&P 500 index in the same stretch, when including dividends. Smaller firms are also pursuing spinoffs. Vista Outdoor Inc. will separate its outdoor products and sporting products businesses into independent companies by the end of the year. And NCR Corp.’s planned split, expected to close in the fourth quarter, will create a company focused on digital commerce and another on ATM-based businesses.
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