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Definition of 'Tax-Free Spinoff'
A corporate action in which a publicly traded company spins off one of its business units as an entirely new company. The spun off company becomes its own publicly traded corporation with its own ticker symbol, board of directors, management team, etc. This type of transaction is deemed to be "tax free" because the parent company is still able to divest the business it wants to separate from; however, the company does not incur capital gains tax on the divestiture, which would be the case in an outright sale of the business unit to another company.
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Investopedia explains 'Tax-Free Spinoff'
There are typically two ways that a company can undertake a tax-free spin off of a business unit. First, a company can choose to simply distribute shares of the spun off company to existing shareholders on a pro rata basis. For example, if you owned 3% of ABC corporation and it was spinning off XYZ corporation, you would receive 3% of the shares issues for XYZ.
Secondly, a company may choose to undertake the spin off by issuing an exchange offer to current shareholders. With this method, current shareholders are given the option to exchange shares of the parent company for shares of the spun off company.
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Search results for 'Tax-Free Spinoff'
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http://stocks.investopedia.com/stock-analysis/2011/El-Paso-Follows-Industrys-Spinoff-Trend-EP-WMB-EPB-ENB0526.aspx
... company El Paso Corporation (NYSE:EP) announced the separation of the company into
two independent public companies through a tax-free spinoff of its ...
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http://stocks.investopedia.com/stock-analysis/2010/4-Energy-Sector-Spinoffs-For-2011-TSO-FST-RDC-VLO-SUN1220.aspx
... sometime in 2011. Forest Oil intends to eventually conduct a tax-free spinoff
of the balance of Lone Pine Resources. Drillers Rowan ...
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http://stocks.investopedia.com/stock-analysis/2008/Look-To-Mother-Nature-For-Safety-PCL-RYN-WOOD1024.aspx
... Recently, Potlatch announced plans for a tax-free spinoff of its pulp-based businesses
to shareholders. The new company will be called Clearwater Paper. ...
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http://stocks.investopedia.com/stock-analysis/2011/Entergy-Gets-Rid-Of-Transmission-Business-ETR-ITC-EXC-CEG1208.aspx
... this Article: CEG, ETR, EXC, ITC. Entergy (NYSE:ETR) announced the spinoff of the ...
entity will then be distributed to Entergy shareholders in a tax-free spin off ...
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http://www.investopedia.com/articles/stocks/09/parents-and-spinoffs.asp
... In a pure spinoff, a company distributes 100% of its ownership interest in a unit
as a stock dividend to existing shareholders. It's a tax-free method of ...
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http://stocks.investopedia.com/stock-analysis/2011/Tyco-Goes-Three-For-One-TYC-COV-SI-UTX-HON-ABB-EMR0921.aspx
... Now the company is going to undertake a year-long process of restructuring and
tax-free spin-offs (technically conducted as stock dividends) that will result ...
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http://stocks.investopedia.com/stock-analysis/2010/The-Motorola-Breakup-MOT0216.aspx
... will split into two independent, publicly traded companies through a tax-free stock
dividend ... Six months later, the spinoff was postponed after the mobile phone ...
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