Corporate Spin-Off Mechanics

Although tax rules have permitted spin-offs since the mid-1950s, spin-offs did not occur with as much frequency and within major corporations until the 1980s, when a trend was ushered in by the spin-off of seven regional Bell companies by AT&T between 1982 and 1983. Since the 1980s, the number and value of corporate spin-offs has escalated. Furthermore, whereas spin-offs accounted for under 10 percent of U.S. divestitures in the 1980s, they accounted for almost 50 percent by the late 1990s, and this trend is growing more in this current market environment.



Parent firm distributes shares of the spun-off subsidiary to parent shareholders

  • Cadbury Schweppes / Dr. Pepper
  • Time Warner / AOL

Parent firm sells a portion or all shares of subsidiary through an IPO in the equity market

  • Bristol-Myers / Mead Johnson Nutrition
  • Citigroup / Primerica

Parent company's shareholders are offered shares of a subsidiary in exchange for the parents' shares (exchange offer)

  • Bristol-Myers / Mead Johnson Nutrition
  • Sara Lee / Coach