Bed Bath & Beyond Inc (fka BBBYQ)

[MoneyMaker111]

BBBY: Successful Corporate Divestiture Already Happening

I believe a corporate divestiture is happening, which will allow Bed Bath & Beyond to spin off Baby with a minimal tax hit.

Here's what I think is happening:

Carl Icahn and Ryan Cohen already met in person about this deal in late 2022 (see meeting picture below):

Icahn's Newell Brands wants BBBY. Ryan Cohen wants Baby. It wouldn't make sense for Newell to buy the whole company and then spin Baby off to Ryan Cohen after the deal is complete. Why would you bother to go through the hassle of including something in a deal if you don't want it?

Newell buys BBBY. BBBY creates a dummy company (Restore Capital?) And transfers all of the assets of Baby to that company. This is essentially carving out Baby. The dummy company then sends all the shares of Baby back to the BBBY holders to be held temporarily. Next, GameStop purchases all of the assets of Baby from the dummy company. So at this point GameStop has all the assets of Baby, but BBBY shareholders has the stock representing those assets.

GameStop pays the BBBY shareholders for the Baby stock with a share swap. So shares of GameStop have to be delivered to BBBY shareholders in exchange for the Baby shares (let that sink in for a second).

So now GameStop owns Baby, and BBBY shareholders have been compensated for the sale of Baby with GameStop shares.

Ryan Cohen then spins Baby off from GameStop into Teddy, or carves both of them out under Gmerica.

I'm at work so I can't really link details right now, but I think this is what's happening. A lot of people keep getting caught up on the fact that it doesn't make sense for BBBY to get rid of Baby since it is a profitable arm of the company, but it makes more sense if a large conglomerate like Newell just wants BBBY.

The way I've described this deal working out is complex, but this is literally how it's spelled out by the IRS to avoid tax hits.

See Section 355, distribution of stock and securities of a controlled Corporation (not sure/ don't care to learn how to link, just google it):

Whether the acquisition by an unrelated corporation of all the assets of a newly formed controlled corporation following the distribution of the stock of the controlled corporation by a distributing corporation will satisfy the requirement of ' 368(a)(1)(C) of the Internal Revenue Code that substantially all of the properties of the acquired corporation be acquired where the assets of the controlled corporation represent less than substantially all of the assets that the distributing corporation held before it formed the controlled corporation.

D=BBBY CORE A=GME C=BBBY TEMP COMPANY X=BABY Y=BBBY

FACTS D, a domestic corporation, directly conducts Business X and Business Y. Ds assets are equally divided between the two businesses. A, a domestic corporation unrelated to D, conducts Business X and wishes to acquire D's Business X, but not D's Business Y.

To accomplish the acquisition, D and A agree to undertake the following steps in the following order: (i) D will transfer its Business X assets to C, a newly formed domestic corporation, in exchange for 100 percent of the stock of C, (ii) D will distribute the C stock to D’s shareholders, (iii) A will acquire all the assets of C in exchange solely for voting stock of A, and (iv) C will liquidate. Apart from the question of whether the acquisition of C’s assets by A will satisfy the requirement of ' 368(a)(1)(C) that the acquiring corporation acquire substantially all of the properties of the acquired corporation, steps (i) and (ii) together meet all the requirements of ' 368(a)(1)(D), step (ii) meets all the requirements of ' 355(a), and steps (iii) and (iv) together meet all the requirements of ' 368(a)(1)(C).

"Only when the tide goes out do you learn who has been swimming naked."

-Warren Buffett

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