The bull market is now closer to nine years old than it is eight, and the great stock market rally of 2017 has continued to amaze skeptics and bulls alike. One consideration about a bull market is that there are many companies that underperform their peers and the market. There are also instances in which companies can operate better and more efficiently if they are more focused on core areas. This has led to waves of unit sales, spin-offs and other business unit separations.
It may not yet be the end of the third-quarter earnings reporting season, but 24/7 Wall St. is already looking toward late 2017 and into the first half of 2018 for some preliminary views for what investors should expect. The stock market gains have been massive, but the Dow could even be headed for over 25,000 in 2018. And there will be many more spin-offs and asset sales coming down the pipe.
For a company to announce a spin-off, sale or divestiture of a business, the usual goal is to unlock value or to focus on a core part of the business. Either way, this is a constant push by activist investors and by members of corporate boards of directors who think somewhat like an activist investor would think.
These are of course subject to change, and there are no assurances that any of the plans will come to fruition. After all, anything can happen in the financial markets, and stocks are now at all-time highs.
Investors may think they do not want to pay attention to companies looking to create so many changes. After all, these can be complicated and can be tax-free or taxable under certain circumstances. But there is some simple proof that these potential spin-offs might be incredibly important to more than just the direct shareholders of each company — many of these are S&P 500 members and some are even members of the Dow Jones Industrial Average.
Here are 13 featured spin-offs already underway and potential spin-offs that could be seen in 2017 and into 2018 that could radically change how Wall Street and Main Street evaluate companies ahead.
BHP Billiton Ltd. (NYSE: BHP) has been under activist pressure from Elliott Management to spin off or sell its shale and oil-producing operations so that it can concentrate on everything else in its mining empire. It turns out that Paul Singer’s efforts won here, and the company is exploring a sale or spin-off of the North American shale and oil operations. How it occurs remains to be seen, but now BHP’s CEO is under more pressure by the activist. This is after billions of dollars have been thrown at the oil unit at much higher prices, and this move is certain to create complicated charges for a multinational company that is already listed in the United States, United Kingdom and Australia.
The activist once used a value of $22 billion for the oil operations, which is not without consequence for the U.S.-listing value of $96 billion. BHP Billiton American depositary shares (ADSs) were recently trading at $36.50, less than 10% off of a 52-week high — but less than half of its 2011 peak.
BP Midstream Partners
BP Midstream Partners L.P. (NYSE: BPMP) is an imminent spin-off of the much larger BP PLC (NYSE: BP). The oil giant is set to spin off the master limited partnership of its Midwest and Gulf Coast pipeline assets.
BP ADSs were last seen up 1% at $39.19, about 1% shy of a 52-week high. BP shares were trading closer to $35 in mid-August, and the market cap is currently about $128 billion for the oil giant. BP’s ADSs have remained under fire for some time, and its 6% dividend yield has more than baffled some investors. BP’s ADSs were also valued above $70 a decade ago.