A FEW MORE SPINS

The newspapers have been having a feeding frenzy over what amounts to one of the largest spins in memory, AT&T Corp.’s plan to spinoff Liberty Media Group, its long-time investment vehicle. Liberty is itself a colorful company, being the investment entity of cable peripatetic pioneer John Malone. Although there has been talk about this for quite some time, it was only in mid-November when the plan for the break-up was finally announced. See Solomon and Cauley, “AT&T Intends to Spin Off Liberty Media,” Wall Street Journal, Nov. 16, 2000, p. A3.

Although there is a great deal of other discussion, it should not escape tax advisors that AT&T has announced that this behemoth spinoff is subject to a favorable ruling from the Internal Revenue Service. The company expects to convert the Liberty Media tracking stock into an asset-based security, and to launch Liberty Media Group as an independent, publicly-traded company. All this is supposed to happen in the second quarter of 2001. Id. (Readers note: there’s another cryptic reference to the often subtle interaction between tracking stock and Section 355.)

Apart from the tax ruling, AT&T has announced it doesn’t see the need for other regulatory approvals. But the tax ruling is obviously critical. As to regulatory approval, recall that the Federal Communications Commission had given AT&T the option of spinning off Liberty, shedding its 25% stake in Time Warner’s cable business, or selling some of its own cable systems. For the spinoff to satisfy the FCC, though, AT&T would also have to cut its ties with Cablevision, a company in which AT&T owns a whopping $4 billion stake. See Waters, “AT&T Confirms Plans to Spin Off Liberty Media,” Financial Times (London), Nov. 16, 2000, p. 1.

Media to Planes

Although other transactions seem paltry by comparison to AT&T’s plans, it should not escape notice that Boeing is considering spinning off some of its high-growth businesses, including parts of its satellite and communications arm and its air traffic management unit. See Hegmann, “Boeing Looks at Spinning Off Units,” Financial Times (London), Nov. 20, 2000, p. 1.

Although there is a good deal of speculation, analysts do not expect Boeing to spin off the entire satellite and communications division. It seems more likely to separate high growth activities, such as Connexion by Boeing. Incidentally, Boeing has yet to sign an airline partner for its Connexion by Boeing system, even though it is being tested by various carriers.

And Pharmaceuticals

Finally, Aventis S.A., the large French drug-maker has unveiled plans to shed its crop-protection division in a strategic overhaul that could fetch as much as 8 billion Euros ($6.86 billion). As is so often the case with European companies, Schering A.G., the German company, holds a 24% stake in the unit, and may prove difficult on the topic of divestment. See Moore, “Aventis Plans to Split Off its Agro-Unit,” Wall Street Journal, Nov. 16, 2000, p. A20. Aventis plans to rename the shed unit as Agreva, supposedly by the end of next year. Again, delicate negotiations with Schering may be needed.

A Few More Spins, Vol. 9, No. 7, M&A Tax Report (February 2001), p. 6.