spin off

UNITED TECHNOLOGIES CORP. $134 (New York symbol UTX; Manufacturing & Industry sector; Shares o/s: 798.6 million; Market cap: $107.0 billion; Takeover Target Rating: Lowest; Dividend yield: 2.1%; TSINetwork Rating: Above Average; www.utc.com) has four main businesses: Climate, Controls & Security makes Carrier heating and air-conditioning equipment, and burglar alarms and firesafety products; Pratt & Whitney manufactures aircraft engines; Aerospace Systems makes engine-control systems and other aircraft parts; and Otis makes elevators and escalators.

The company will now buy Rockwell Collins Inc....

SHERWIN-WILLIAMS CO. $414 (www.sherwin-williams.com) completed its all-cash acquisition of rival paint maker Valspar Corp. on June 1, 2017. If you include Valspar’s debt, the total price was $11.3 billion. The company expects the purchase will increase its free cash flow (regular cash flow less capital expenditures) from $1.4 billion in 2016 to around $2.0 billion in 2020....

EBAY INC. $38 (Nasdaq symbol EBAY; Aggressive Growth Portfolio, Finance sector; Shares o/s: 1.1 billion; Market cap: $41.8 billion; Price to-sales ratio: 4.2; No divd. paid; TSINetwork Rating: Above Average; www.ebay.com) operates e-commerce websites where sellers pay fees to auction items or offer them at fixed prices....

PFIZER INC. $36 (New York symbol PFE; Income Portfolio, Manufacturing & Industry sector; Shares outstanding: 6.0 billion; Market cap: $216.0 billion; Price-to-sales ratio: 4.1; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.pfizer.com) is one of the world’s leading prescription drugmakers....

Conagra’s move to spin off its frozen potato business Lamb Weston in 2016 has spurred the shares of both companies: Conagra is up 9% since the spinoff, while Lamb Weston has soared 67%.

A large part of those gains is the smaller size and focus of each company....

Dear Inner Circle member,

This will be our last Inner Circle Q&A for 2017. Our next Q&A will go out on Wednesday, January 3, 2018. Now is a good time to say Thanks! to the many long-time friends, associates and kindred spirits who make up the membership of this unique organization....

WYNDHAM WORLDWIDE CORP. $112 (New York symbol WYN; Consumer sector; Shares outstanding: 101.2 million; Market cap: $11.3 billion; Takeover Target Rating: Medium; Dividend yield: 2.1%; TSINetwork Rating: Extra Risk; www.wyndhamworldwide.com) plans to spin off its hotel business as Wyndham Hotel Group....

PENTAIR PLC $70 (New York symbol PNR; Manufacturing Sector; Shares outstanding: 181.6 million; Market cap: $12.7 billion; Takeover Target Rating: Medium; Dividend yield 2.0%; TSINetwork Rating: Average; www.pentair. com) is a diversified industrial manufacturing company that sells to businesses in the food, water and energy markets.

On April 28, 2017, Pentair completed the $3.2 billion sale of its Valves & Controls business to Emerson Electric (New York symbol EMR)....

Spinoffs take place when a company decides to get rid of a portion of its asset base, possibly because it wants to focus its activities elsewhere. Usually, it’s unable to sell the assets for a price that it feels reflects their true value. Instead, the parent company sets the assets up as a separate company then hands out shares to current shareholders as a special dividend.

The parent will only spin off the unwanted subsidiary if it’s fairly confident this will pay off for shareholders in the long term, if not in the short.

On the other hand, initial public offerings (also known as IPOs) are inherently riskier than existing stocks—or spinoffs for that matter....

eBay spun off its transaction-processing business in July 2015. The PayPal spinoff was partly due to pressure from prominent activist investor Carl Icahn, who saw it as a way to unlock value for shareholders.

Since the spinoff, eBay shares are up 30%....