GPS stock was flying high on Thursday following news of plans to spin off the Old Navy business.
Gap (NYSE:GPS) says that it’s current plan is to take its Old Navy business and spin it off into its own publicly traded company. The remaining businesses will be kept together under a new company name.
According to Gap, the Old Navy spinoff will have plenty of room to grow. It claims that this will be possible due to brand recognition, as well as its leadership in its category. The idea is that the new company will be better able to focus on its own needs when not connected to the rest of Gap. Old Navy is also bringing $8 billion in annual revenue with it.
The businesses that will continue to operate under the other new company will include Gap, Athleta, Banana Republic, Intermix and Hill City. This new company doesn’t have a name yet, but yearly revenue is $9 billion.
What exactly can investors in GPS stock expect from the spinoff? Well, the company says it will be breaking its shares down into two new shares. This will give shareholders equal amounts of shares for the Old Navy company and the other new company.
Gap says that it is expecting the spinoff of Old Navy into its own business and the creation of its new company to reach completion in 2020. It will have to complete other closing conditions first. However, the company says that the process should be tax-free for GPS shareholders.
GPS stock was up 18% as of noon Friday.
As of this writing, William White did not hold a position in any of the aforementioned securities.