8 Corporate Spin-off Examples You Should Know About

1. GE 

Year: 2023

Reason: To focus on aviation

Spun-off entity: GE Healthcare Technologies

‍

Earlier this year, GE announced it had completed the spin-off of its healthcare division and global leader in precision care, GE HealthCare Technologies. This was just part of a strategy announced back in 2021 to break GE up into three separate companies with three different focuses: energy, health, and aviation.

‍

As of January 4th of this year, GE Healthcare started trading as an independent company on the Nasdaq exchange under the ticker symbol “GEHC”. It was also added to the S&P 500. As explained by President and CEO of GE HealthCare, Peter Arduini:

‍

“Today is an incredibly exciting day for GE HealthCare as we become an independent company and start a new chapter advancing our position as a global leader in precision care. We are on the verge of true industry transformation as digital innovation reshapes the experience of patients and providers with an increased need for more precise, connected, and efficient care.”

‍

Although GE Healthcare is now independent, GE retained 20% of the spin-off to facilitate further capital allocation flexibility. The spin-off itself was tax-free, which was beneficial for GE stockholders who received one share in GE Healthcare stock for every three shares of GE stock they owned.  

The next spin-off on the horizon? GE’s energy, power and digital services operations which is expected to be complete by early 2024.
‍

2. L Brands

Year: 2021

Reason: To focus on Bath & Body Works

Spun-off entity: Victoria's Secret

‍

Back in 2021, L Brands made headlines when it spun off one of its flagship brands, Victoria's Secret, known for its lingerie and beauty product lines. Victoria's Secret had been facing challenges brought on by changing consumer preferences as well as criticisms over its marketing strategies. Negative press and documentaries like Hulu’s Victoria’s Secret: Angels and Demons also weighed heavily on the company’s image. 

‍

Despite coming up with a sturdy turnaround plan, the general perception was that association with the lingerie brand was hurting the valuation of Bath & Body Works, the remaining L Brand company. Separating Victoria's Secret and Bath & Body Work into two distinct entities was expected to bolster both companies, enabling:

‍

• Victoria's Secret to take full control over its brand turnaround 
• Bath & Body Works to focus on growth with no potential valuation drag from its counterpart brand

‍

Following the spin-off on August 3rd, 2021, Victoria's Secret started trading on the New York Stock Exchange under the ticker symbol "VSCO", while L Brands changed its name to Bath & Body Works, Inc. The change reflected its new focus on the remaining brand. Its stock symbol also changed from "LB" to "BBWI".

‍

Similar to the GE example, this spin-off was also tax-free. L Brands stockholders received one share of Victoria's Secret common stock for every three shares of L Brands common stock they owned. 
‍

3. Jefferies Financial Group

Year: 2023

Reason: To boost operational focus

Spun-off entity: Vitesse Energy, Inc.

‍

Earlier this year, Jefferies Financial Group announced it had completed the spin-off of its energy business, Vitesse Energy, Inc., which is now an independent, publicly traded company under the ticker symbol "VTS".

‍

The move was part of Jefferies’ efforts to streamline its corporate structure, slim down its  portfolio, and become more cost-effective with a narrower industry focus. Chairman and CEO of Vitesse, Bob Gerrity, expressed his enthusiasm about the recent spin-off, stating: 

‍

“We at Vitesse could not be more excited to have gone public. We are extremely grateful to Jefferies for having provided the insight and resources that allowed us to grow from the start-up we were in 2014 to where we are today. And we are especially grateful for their confidence in us as we move into the future as an independent, publicly traded company.”

‍

The move was also good news for shareholders. For every 8.49668 Jefferies common shares owned, shareholders received one share of Vitesse common stock. About 26.6 m shares of Vitesse Stock went to Jefferies shareholders. This came to approximately 94.37% of the total issued and outstanding shares of Vitesse Common Stock.

‍

So, what does all this mean? Well, Jefferies' shareholders now have a direct stake in Vitesse, giving them exposure to the energy sector. And Vitesse, once part of the Jefferies conglomerate, now has the independence to focus on its core business. A win for both sides.
‍

4. Kellogg's

Year: 2022

Reason: To focus its efforts and increase shareholder value

Spun-off entity: WK Kellogg Co

‍

In 2022, the Kellogg Company announced its plan to split into three separate companies, spinning off its North American cereal and plant-based foods businesses to focus on the remaining company, Global Snacking Co. The goal? To unlock the full potential of each business and increase long-term shareholder value.

‍

This year, Kellogg’s has decided to keep its plant-based food business, MorningStar Farms, in-house (due to favourable market changes), resulting in two (not three) new entities:

‍

• Kellanova - The Global snacking business 
• WK Kellogg Co - The North American cereal business 

‍

After the spin-off, Kellanova’s portfolio will include powerhouse brands like Pringles, Cheez-Its, Pop-Tarts, Kellogg's Rice Krispies Treats, MorningStar Farms, Incogmeato, Gardenburger, Nutri-Grain, RXBAR, and Eggo. It will also house popular international cereal brands like Zucaritas, Krave, Miel Pops and more.

‍

The other entity, WK Kellogg Co, will be spun off by the end of the year, focusing on the U.S., Canada, and the Caribbean with a portfolio of brands that includes Froot Loops, Mini-Wheats, Raisin Bran and Corn Flakes, among others. 
‍

5. Intel

Year: 2022

Reason: To focus on its core semiconductor business

Spun-off entity: Mobileye

‍

After purchasing Mobileye for $15.3 B back in 2017, Intel announced it would be spinning the company off in 2021. Mobileye is a developer of autonomous driving technologies and driver-assistance systems that includes cameras, computer chips and software. Its partners include Audi, Ford, BMW, GM, Volkswagen, and Toyota, and it operates in eight countries.

‍

The spin-out was completed in 2022 when Mobileye began trading on the Nasdaq Global Select Market under the symbol “MBLY”. On the day of its initial public offering, Mobileye raised $861 M, and its stock increased by over 37% from the initial offering price of $21 a share, raising it to $27.85.

‍

The move to spin off Mobileye reflects Intel's broader strategy to revive its core semiconductor business and compete more effectively with players like AMD and Nvidia. As part of the strategy, Intel announced it would be investing the IPO proceeds to build more chip factories, with the goal of becoming a foundry for other chipmakers. 

‍

In addition, Intel will continue to hold a majority stake in Mobileye, and the two entities will remain strategic partners, leaving plenty of room for future collaborations. 
‍

6. AT&T Inc.

Year: 2022

Reason: To focus on the core business and reduce debt

Spun-off entity: WarnerMedia

‍

AT&T made news in 2022 when it announced it would be spinning off WarnerMedia in a $43 B transaction to merge it with Discovery Inc. The telco purchased WarnerMedia (then Time Warner) in 2018, for $85 B, in the hopes of entering the streaming market and competing with players like Netflix and Amazon. It seemed like a good bet, considering WarnerMedia's vast portfolio of companies which includes names like HBO, CNN, and Warner Bros. 

‍

However, AT&T's ambition to diversify its offering by blending content creation with distribution didn't yield the desired results, creating a debt burden and distracting from the company’s core telecommunications operations. The move to spin off WarnerMedia would enable AT&T to:

‍

• Refocus on its core telecommunications business and upcoming 5G opportunities
• Reduce its debt
• Merge it with Discovery to better compete with platforms like Netflix and Disney+

‍

The spin-off was completed in April 2022 when WarnerMedia, now merged with Discovery Inc, started trading on the Nasdaq under the ticker symbol "WBD". Shareholders who held AT&T stock at market close received 0.24 shares of Warner Brothers Discovery for every 1 AT&T share they held.
‍

7. Johnson & Johnson (J&J)

Year: 2023

Reason: To focus on its pharmaceutical and medical devices segments

Spun-off entity: Kenvue

‍

Earlier this year, J&J spun off its consumer health division, now known as Kenvue, marking the most significant restructuring in the company's 135-year history. The goal was to refocus JNJ's operations on the development of medicines and medical devices.

‍

Kenvue, known for popular products like Band-Aid, Tylenol, Tylenol and Listerine, made $15.1 B in sales in 2021 but was still not performing as well as rival units or other more successful J&J segments. The spin-off enabled JNJ to separate from its lower-growth consumer health division and focus more on developing medicines and medical devices - both high-profit segments.  

‍

Kenvue began trading on the New York Stock Exchange under the ticker "KVUE" on May 4th, with J&J retaining 91.9% of the ownership. As explained during the filing:

‍

“Johnson & Johnson will continue to control the direction of our business, and the concentrated ownership of our common stock may prevent you and other shareholders from influencing significant decisions”

‍

The move by J&J reflects a larger trend among healthcare companies like Merck, Sanofi, Pfizer and GSK, which have separated their consumer health products to focus on their more profitable pharmaceutical segments.
‍

8. IBM

Year: 2021

Reason: To sharpen its focus on AI and the cloud

Spun-off entity: Kyndryl

‍

In 2021, IBM announced it had completed the spin-off of its managed infrastructure services unit into a new public company called Kyndryl. The move was intended to help IBM focus more on its high-growth cloud business and AI capabilities. As explained in a recent Forbes article:

‍

“Although the organisation was critical to how IBM engaged with its customer base, it did not attract the investment it perhaps deserved and became a drag on IBM's overall business.”

‍

The spin-off also enabled IBM to reorganise into three main operating segments: Software, Consulting (formerly Global Business Services), and Infrastructure. After an initial financial dip, Kyndryl is showing signs of growth, having launched two new branded services in 2022: Bridge (an open integration platform) and Vital (a design workshop where Kyndryl consultants can work with company employees to prototype applications).

‍

Following the spin-off, Kyndryl began trading on the New York Stock Exchange under the ticker symbol "KD". As part of the separation, IBM shareholders received one share of Kyndryl common stock for every five shares of IBM common stock held.

Final thoughts

These spin-off examples highlight how businesses all over the world are adapting to the current climate and ever-changing landscape. While the outcomes of these ventures can be uncertain, it’s likely that many will go on to be successful. According to CNN Business, in 2022, 11 of 20 spin-offs outperformed the S&P 500, and six outperformed their parent companies.

‍

It will be interesting to observe how these spun-off entities evolve independently and how the parent companies fare in the years to come.

_________

‍

Looking to launch your next spin-off? We can help you leverage insights gained during your validation initiatives to take your independent venture to scale and beyond.

‍