demerger

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De-Merger

A situation in which a company sells one or more of its subsidiaries. Shareholders in the original company are usually given the same proportion of shares in the newly independent company. See also: Spin-off, Divestiture.

demerger

the break-up of a company, often originally formed through a MERGER, into two (or more) separate companies. This is most easily achieved when the original businesses comprising the merger have continued to be run as separate divisions of the enlarged group. In this case, for example, the A-B company could be split into separate quoted companies, A and B, with the company's existing shareholders being given shares in both companies. Thus, unlike a DIVESTMENT (the sale of a division to outside interests) or a MANAGEMENT BUY-OUT (the sale of a division to its existing management), initially at least the companies continue to be owned by their existing shareholders.

A demerger may occur because the merged company has failed to perform up to expectations because of internal conflicts of management, or may result from a rethink of the company's BUSINESS STRATEGY favouring a concentration on ‘core’ businesses.

References in periodicals archive ?
In Finnish income taxation, part of the remaining acquisition cost of Ahlstrom shares will be transferred to the MunksjE[micro] shares received as demerger consideration in the Coated Specialties demerger.
Based on the average weighted trading prices, the proportion of the fair values of MunksjE[micro] shares received as demerger consideration in the Coated Specialties demerger and Ahlstrom shares do not differ significantly from the proportion of net assets of Coated Specialties and the total net assets of Ahlstrom.
With the financial services industry facing an unprecedented restructuring, it is crucial the slew of demergers taking place buck the historical trend.
Financial services companies are the worst performers after a demerger, while technology, media and telecommunications (TMT) and manufacturing companies are the most successful, according to a new report.
The demergers have also significantly weakened anglophone influence in the executive committee, and for all intents and purposes the West Island is no longer a player in Montreal affairs.
The idea of a made-for-Montreal solution makes sense since the impact of the demergers outside of Montreal proved to be much less dramatic and significant.
For these businesses, demergers can lead to more options in terms of sales to trade buyers, management buyouts or a public flotation for at least one of the businesses involved.
Demergers for unquoted companies can involve splitting trading businesses from other businesses, like property investment, which can mean lower capital gains tax and inheritance tax bills in the future.
This can probably be applied to all large-scale change in organizations including demergers and will have an impact on the psychological contract between the employee and the employer.
He also noted that, much is written about demergers, but little has been done to quantify them.
If the good news is that demergers can add more value, without running up tax bills, there is a downside.
But the group, which revealed one-off costs mostly relating to the demerger process totalled a bigger-than-expected pounds 526 million, said it was now better placed to succeed as it focuses on the DIY and electrical markets.