by Tom Taulli | December 11, 2012 10:44 am
Because of aggressive acquisitions over the years, Abbott Laboratories (NYSE:ABT) has really become two companies — a drug operator and a diversified health care firm (with diagnostic systems, medical devices and nutritional products). So, to unlock more shareholder value, the company is in the process of a spinoff.
In fact, Wall Street is already making a big valuation adjustment. The drug company — named AbbVie, which is being traded on a “when issued” basis — has a market cap of $55.3 billion, which actually is bigger than the parent company’s $47.9 billion.
Investors generally like to invest in companies that have a singular focus; it makes the analysis much easier and also means management has fewer distractions.
And yes, spinoffs often have been good for investors. A notable example is Marathon Oil (NYSE:MRO), which spun off its refining division, Marathon Petroleum (NYSE:MPC) back in June 2011. Since then, shares have ripped off 85% gains, making it one of the year’s top stocks to date.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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