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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 ?
If a spin-off company is determined to be ineligible for an index, it will be removed on the first day of regular way trading using its closing price on the primary exchange.
An examination of the identities of the sponsored spin-off blockholders reveals they are primarily sophisticated investors such as Warren Buffett, the Gabelli Fund, Morgan Stanley, and Forstmann Little.
Finally, section 355 also imposes other requirements for tax-free treatment in a spin-off in addition to those that are subject to the new ruling policy, such as the five-year active business requirement.
United Communications Group has found a way to keep the staff of its highly successful and profitable publishing company in place as it pours millions into its two spin-off, start-up IT companies.
The spin-off will be accomplished through the pro rata dividend of 100% of Titan PCB, a wholly-owned subsidiary of Titan, to all shareholders of record on the record date set by Titan.
Under section 355(e)(2)(B), a plan is presumed to exist where (1) one or more persons, (2) acquire directly or indirectly, (3) stock representing a 50-percent or greater interest in the distributing or any controlled corporation, (4) during the four-year period beginning two years before the spin-off distribution.
The recently announced sale of Sears Tower and today's announcements of the Allstate spin-off and plans to explore the divestiture of the Homart Development Co.
For a spin-off to be considered nontaxable, there must be a valid corporate business purpose for the transaction and the spin-off cannot be primarily a device for distributing earnings and profits (E&P).
Generally, the IRS will be taking a more active role in scrutinizing the motivations and purposes of the spin-off than in the past.
45 billion in 1993, due almost entirely to the effect of the spin-off of Albemarle.
December 19, 2006 is Date for Hathaway Shareholders to Be Eligible for Spin-off Shares
P owns S and S owns S1), to position S1 for a spin-off to P's shareholders, S would first have to spin S1 off to P.