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A company can create an independent company from an existing part of the company by selling or distributing new shares in the so-called spin-off.


A situation in which a company offers stock in one of its wholly-owned subsidiaries or dependent divisions such that subsidiary or division becomes an independent company. The parent company may or may not maintain a portion of ownership in the newly spun-off company. A company may conduct a spin-off for any number of reasons. For example, it may wish to divest itself of one industry so it can expand into another. It may also simply wish to profit from the sale of the subsidiary. A spin off should not be confused with a split off.


In a spin-off, a company sets up one of its existing subsidiaries or divisions as a separate company.

Shareholders of the parent company receive stock in the new company based on an evaluation established for the new entity. In addition, they continue to hold stock in the parent company.

The motives for spin-offs vary. A company may want to refocus its core businesses, shedding those that it sees as unrelated. Or it may want to set up a company to capitalize on investor interest.

In other cases, a corporation may face regulatory hurdles in expanding its business and spin off a unit to be in compliance. Sometimes, a group of employees will assume control of the new entity through a buyout, an employee stock ownership plan (ESOP), or as the result of negotiation.

References in periodicals archive ?
S&P Dow Jones Indices' current practice is to evaluate spin-offs using a market determined price, if available.
Our motivations for separating spin-offs into sponsored and conventional spin-offs are twofold.
The IRS has offered three alternative representations the company may make with respect to whether a spin-off and an acquisition of shares in the Parent or Spinco before or after the spin-off are part of a plan under section 355(e).
By combining a tax-free spin-off distribution under section 355 with a subsequent acquisition of either the distributing or controlled corporation by way of one of the methods for taxfree reorganizations (e.
Generally, the IRS will be taking a more active role in scrutinizing the motivations and purposes of the spin-off than in the past.
will address what has been driving the dramatic increase in the number and types of spin-offs witnessed over the past few years in the opening address.
While Fitch finds the latest changes and revised guidance somewhat disconcerting, it appears that outstanding senior unsecured debt will be retired with the spin-offs of Real Estate Services and Hospitality.
The Board evaluated the Committee's recommendations, considered the rules regarding spin-offs, and determined that COG was qualified to be spun-off at this time.
DALLAS -- Rapidly Growing Company Anticipates Three Spin-offs in 2005 with Homeland Security Subsidiary Spin-off Recently Announced
By combining the traditional technology service business with the emerging technology value-added, not only are the higher profits from the emerging technology products blended in for improved net profits, an entirely new income line is added to the overall business -- equity income through equity dividend spin-offs.
eCom, which has spun off its ten wholly owned subsidiaries as independent public companies, plans to now expand the remaining spin-offs by acquiring established businesses similar to ACH and F4W.