The following article is adapted from reprinted from the M&A Tax Report, Vol. 7, No. 6, January 1999, Panel Publishers, New York, NY.


By Robert W. Wood, San Francisco

A new crop of spinoffs has been mentioned in the press, sometimes for the first time and in some cases ending months of discussion. One of the behemoth deals involves General Motors which intends to raise some $1.5 billion by selling a 15-19% stake in Delphi Automotive Systems in an initial public offering. The whole company would be valued at up to $10 billion. The rest of it will be spun off by the end of 1999 to become the world's largest independent vehicle-parts maker. See The Economist, Nov. 21, 1998, p. 7.

In a plan that has been discussed for quite some time, Hilton Hotels' shareholders have approved the spinoff of Hilton's gambling operations. Shareholders of Hilton Hotels Corp. overwhelming approved the gambling spinoff at a special meeting. It was announced during the Summer, when Hilton said its hotels and casinos would be valued more highly on Wall Street if they traded separately. The spinoff is expected to take effect by the end of the year, following the issuance (hopefully!) of an IRS letter ruling regarding the spinoff. Hilton will become a standalone hotel company with 260 hotels following the spinoff. See Binkley, "Hilton Shareholders Approve the Spinoff of Gambling Unit," Wall Street Journal, Nov. 25, 1998, p. B4. And, the Pennzoil Co./Quaker State transaction, involving Pennzoil's spinoff of its marketing, manufacturing and fast-oil-change businesses, has just received its ruling from the IRS. (See "IRS Gives Tax-Free Status to Quaker State Transaction," Wall Street Journal, Dec. 2, 1998, p. B18.)

Elsewhere, Hoechst AG unveiled an ambitious plan in Germany to spinoff most of its remaining industrial and chemical activities under a new separately quoted company to be called Celanese AG. The new plans call for a spinoff to be completed early next year, with Celanese based in Frankfurt but to be a "strongly American company." See Moore and Warren, "Hoechst Maps a Spinoff of Most Chemical Lines," Wall Street Journal, Nov. 18, 1998, p. A17. This move on the other side of the Atlantic received coverage both in the U.S. and abroad. See Bowley and Lewis, "Hoechst Splits Off Industrial Chemicals," Financial Times, Nov. 18, 1998, p. 21.

Also on that side of the pond, Johnson Matthey, the precious metals and ceramics group, is considering spinning off its electronic materials division. See Pretzlik, "JM May Spin Off Division," Financial Times, Nov. 26, 1998, p. 23.

Spins in the News, Vol. 7, No. 6, The M&A Tax Report (January 1999), p. 5.