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Breakup Value

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Breakup value

breakup value
The market value of all the individual parts of a firm if the firm were to be broken up and the individual parts operated independently. If the breakup value of a firm exceeds the market value at which its stock trades, the firm may be managed and operated inefficiently. In such a case, stockholder holdings would increase in value if parts of the firm were divested. Many takeovers originate when raiders spot firms with breakup values that exceed the prices at which those firms' stocks are traded.

Breakup Value
The value of a division in a company if that division were its own, independent company. Companies considering taking over another use the breakup value, among other metrics, to determine whether a takeover is worth the time and expense. It is also called the private market value.


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Merrill Lynch assumes Santander would buy ABN Amro's Brazilian and Italian assets from Royal Bank of Scotland at its previously published breakup value of e22 billion.
News Corporation is trading far below its book and breakup values.
Comment: Rating upgraded to "accumulate" because the breakup value is much greater than the market value.
 
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