Spin-offs: The secrets of success

Demergers have performed strongly in recent decades. As BHP prepares to split from South32, we look at the reasons for their success.

Summary: The share prices of spun-off businesses have performed better on average than the benchmark and their parent companies, UBS research found. A split can help each division to focus more and to be more accountable to shareholders, and staff can find it more motivating to control their own destiny. Analysts are mixed on BHP Billiton’s plans to spin off South32, with some pointing out BHP’s strong history of demergers, and others questioning the timing, given weak commodity prices.

Key take-out: One study found that on average, spin-offs beat the ASX200 index by 40.1% after two years.

Key beneficiaries: General investors. Category: Shares.


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