The following article is adapted and reprinted from the M&A Tax Report, Vol. 8, No. 12, July 2000, Panel Publishers, New York, NY.

MORE SPINS IN THE NEWS

By Robert W. Wood

It is hard to keep up with the dizzying amount of spin doctoring going on with public companies. Some spins are being announced, some are being implemented, and some are not doing so well. Here is a miscellany.

The long awaited spinoff from Ford Motor Company of Visteon Corp. is happening. Early indications are that it will take a long time for this No. 2 auto parts maker to become truly independent from Ford. In early June, Ford announced that the shareholders of Ford will receive one share of Visteon for approximately every 8 shares of Ford. For an interesting discussion of Visteon's likely life after Ford, see Shirouzu, "Ford Sets Distribution for Visteon Spinoff as Unit Looks to Life After Separation," Wall Street Journal, June 5, 2000, p. 84. A week after the announcement, the details of Ford's spin of Visteon became more clear. Still, analysts were predicting that there would be uncertainly about how many Ford shareholders would sell their stock right away. See "Ford Motor Co. Gives Terms for Distribution of Visteon in Spinoff," Wall Street Journal, June 14, 2000, p. B-2.

Turning from auto parts to mining and engineering, Flour Corp. has said its board approved a plan to split Flour into two publicly traded entities. One will assume the struggling coal mining businesses, while the other will hold its engineering and construction operations (that are considerably larger). Announced in early June, the transaction is predictably subject to shareholder approval, a debt-free financing, and of course, the inevitable favorable ruling from the Internal Revenue Service. (I meant inevitable that it is necessary, not inevitable that it will be given!). For details, see Rundle, "Flour Board Clears Plan to Split Firm Into Two Concerns," Wall Street Journal, June 8, 2000, p. A-3.

Some entities after the spin do not fair so well, despite investment banker letters that make the prospects for the spin (and "enhanced shareholder value" look better). A good example seems to be Monsanto Co. This company has had a varied history. Most recently, Monsanto merged with Pharmacia & UpJohn, a 30 Billion Dollar deal completed in March. Apparently Pharmacia wanted the Monsanto pharmaceutical operation (Searle), but not necessarily the agricultural business.

Now, Pharmacia Corp. plans to sell up to 20% of the agricultural operation (named Monsanto Co.) to the public later this summer. For details, see "Rocky Ground for Monsanto?," Business Week, June 12, 2000, p. 72.

Lucent Again

Lucent Technologies, Inc. is in the news yet again, this time for its contemplated plan to spinoff its microelectronics unit in a deal that may be worth more than $50 billion. Sounding like investment bankers, Lucent's statements refer to unlocking the value of a division that right now seems hampered by being with Lucent. See Solomon, "Lucent Technologies Considers Spinoff of Microelectronics Unit," Wall Street Journal, June 15, 2000, p. B-10. See also Waters, "Lucent Mulls $50bn Spin-Off for Divisions," Financial Times (London), June 16, 2000, p. 20.

More Pharmacy Industry Spins

Adding to the list of spins in the pharmaceutical industry over the past few years, is the latest from ICN Pharmaceuticals, Inc., which unveiled a plan to divide by three. There are to be two subsidiaries to be controlled by ICN. ICN Pharmaceuticals, Inc. will be split into 3 publicly traded companies. See Rundle, "Investors Plan ICN's Proposal to Split Up," Wall Street Journal, June 16, 2000, p. B-2.

There are a couple of other spins worth mentioning. Adaptec Inc. has announced plans to split off its software business unit into a separate company. See, "Adaptec, Software Arm to Split," Wall Street Journal, June 9, 2000, p. A-10. And, on the other side of the pond, Givaudan, a top flavor and fragrance company is to be finally spun off from Roche within the next few weeks. At this writing, the deal is not nearly done, but it has been in the works for quite some time. See Hall, "Spin-Off Set to Value Givaudan at SFr5bn," Financial Times (London) May 25, 2000, p. 19.

Finally, on the topic of spins that do not sound too good to shareholders, and in some cases management, consider the high flying mutual company, Janus Capital Corp. Kansas City Southern Industries, Inc. actually owns Janus, and plans to spinoff the various financial services subsidiaries, including Janus Capital Corp. This has long been reported.

What has not been reported is that managers at Janus apparently are still disappointed. Apparently, there are fears that some of the Janus managers — including star fund managers — may jump ship. For details, see Lucchetti, "Janus Managers are 'Disappointed' with Spinoff Plans," Wall Street Journal, June 16, 2000, p. B-12.

More Spins in the News, Vol. 8, No. 12, The M&A Tax Report (July 2000), p. 1.