In our recent series on corporate-spin off transactions, we focused on why a company should consider a spin-off, and how the spin-off could be implemented. In this post, we briefly outline some of the common risks that a company should be aware of before pursuing the spin-off.
Even for seasoned practitioners, a great deal of planning is required to effectively “spin-out” a part of an existing business and the road to completion is rife with challenges and legal complexities. First and foremost, a failure to adequately address the division of assets and liabilities as between the Parent and Spinco could … Continue Reading
In our last post, we outlined some of the reasons why corporate spin-offs are used. In this post, we address some of the most common methods used to implement the corporate spin-off.
How do I implement it?
In some cases, a Canadian public corporation seeking to distribute shares of Spinco to its shareholders will be able to do so by a reorganization known as a “butterfly transaction”. The advantage of a butterfly transaction is the deferral of Canadian income tax both at the corporate and shareholder level. The tax rules governing butterflies are highly complex and various restrictions, including … Continue Reading
On March 6, 2013, Time Warner Inc. issued a press release announcing plans to implement, courtesy of a spin-off transaction, a “complete legal and structural separation of Time Inc. from Time Warner.”
The proposed spin-off highlights an increasing trend among public companies in the face of tough market conditions – the transformation of what are usually large corporations not by building up their assets, but by efficiently siphoning them out. Time Warner would know, too – in the past decade, the company has used the vehicle of the spin-off to divest several of its major divisions, including the spin-off of … Continue Reading