Replies to post #129040 on Biotech Values

[mouton29]

But not when the spun-off company is immediately acquired by a third party. That’s the point the Bloomberg piece failed to address.

Timing is not necessarily the issue, the key question is whether there was an agreement or substantial discussion before the spin and what the terms of the spin are. For example, if the day after the spin is consummated, someone makes an unsolicited bid for one of the companies, that will not affect the tax-free status of the spin, even if the distributing company believed the blather from the investment bankers to the effect that the spin would likely trigger interest in the distributed company (the final 355(e) regulations require bilateral negotiations, in contrast to prior proposed regulations which referred to the distributing company's intentions). Similarly, if the "spinco" shareholders keep control (as in the Pringles deal), that will not trigger 355(e), even if there were prior discussions or an agreement. It is true that many of the safe harbors in the regulations are keyed to when the merger happens. But an unsolicited post spin bid is not going to cause a problem. Perhaps the Bloomberg piece could have been clearer on this, but they are not, after all, the New York Times ;-)