By Robert Lenzner, Forbes Staff Corporate spinoffs are all the rage these days, not the least reason being the concept that the market may value the two parts of the spin off as far greater than the original combined operations. One immense success is that over the 7 years since Viacom spun out its holdings in CBS shares, both companies have substantially outperformed the market averages– proving that the split up was a win-win for all Viacom shareholders. CBS has done even better than Viacom– up 77.1%, aided lately by a split up of its own– a spin off of the entertainment complex’s outdoor advertising operation into a REIT that will be another income producer for CBS shareholders by passing through its income. Viacom itself has gained 50.6% in value helped in part by regular reductions in the number of shares outstanding from open market repurchases. By comparison, the Standard & Poor’s 500 index has gained only 24.2%- half Viacom’s performance, a third of what CBS shares have done. The spinoff by Time Warner(TWX) of Time Warner Cable (TWC) has been no slouch either. Since January, 2010 it looks to me as if TWC has doubled in price, while TWX surprisingly has gained 67% TWC, almost wholly owned by large institutional investors sells at $91.58, earning $6.90 a share or selling at 13 times earnings per share and yielding almost 3%. Who would have guessed how the strategy would pay off. Now, Time-Warner is planning to give its own shares another beneficial jolt upward by spinning off Time’s entire magazine empire into a separate public company. This venture into a declining print media business may not turn out so well for TWX shareholders; so I’d imagine you’ll see a great deal of selling pounding the magazine company. And it was just 2 decades ago that brutal battle was fought over these operations. Rest in peace Steve Ross. I’d venture a guess that the stellar performance of News Corp. shares these past several months to over $30 a share, a better than 50% return since the scandal-ridden days of hacking cell phones in the UK knocked the shares well below $20. News Corp. now is planning to spin off its newspaper publishing operations in a separate company, while concentrating itself on the Fox television and movie business— while building out a sports channel competitor to ESPN. Don’t count Murdock out. He’s got a lot of life left in him. Spinoffs and would-be spinoffs are going on across American business, in part because some companies have determined that running a huge food company like Kraft might benefit its shareholders by placing some of its far-flung assets in a separate company. I believe you may see many more operations spun-off from global multinationals that investors could find more promising than the huge conglomerate where they were hidden from sight– and perhaps not managed aggressively enough. There is even an index for spin-off stocks– the Beacon Spin-Off Index, and ETFs like the Guggenheim Spin-Off ETF(CSD), which ha an exceptional …read more
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