spin off

CHESAPEAKE ENERGY $27.17 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848-8000; www.chkenergy.com; Shares outstanding: 664.0 million; Market cap: $18.1 billion; Dividend yield: 1.3%) is preparing to spin off its oil-field services division into a separate, publicly traded company....

PLEASE NOTE: Due to the Good Friday holiday, our next Hotline will go out on Thursday, April 17, 2014. BANK OF NOVA SCOTIA, $64.24, Toronto symbol BNS, has formally changed the name of its ING Direct subsidiary to Tangerine (www.tangerine.ca). The bank bought ING Direct from its Netherlands-based parent, ING Group, in November 2012. This business provides no-fee banking services to 1.9 million clients, mainly over the Internet. The new name will let Bank of Nova Scotia keep using the orange colour associated with the ING Direct brand....

From time to time, companies set up one or more of their divisions or subsidiaries as an independent firm, then hand out shares in that company to their own investors as a special dividend, or “spinoff.” You can contrast a spinoff with a new stock issue. That’s when a company (often a newly created or junior company) issues new stock to sell to the public. The two situations are like two sides of a coin—one favourable to investors, the other unfavourable. The motivations of the companies are nearly opposite. Companies sell new issues to the public when they feel it’s a good time to sell. That may be, and often isn’t, a good time for you to buy. In addition, the underwriting brokerage firms try to spark publicity about the new issue, and they pay extra commission (as much as double the regular rates) to spur their salespeople to sell the new issue to their clients. This tends to create a high-water mark in the price of the new issue. Unless the new company can follow up with business success, the price of the new issue may languish for months or years....

The Guggenheim Spin-off ETF, $44.67, symbol CSD on New York (Units outstanding: 17.0 million; Market cap: $759.4 million; www.guggenheiminvestments.com), aims to track the Beacon Spin-off Index. The ETF’s MER is 0.78%. The Beacon Spin-off Index consists of 24 stocks. Companies can be included if they have been spun off in the past 30 months. There are no limitations on market capitalization (or the total value of a company’s outstanding shares), but companies in the index are mainly small- and mid-caps with capitalizations under $10 billion. Beacon defines a spinoff as any firm resulting from either of the following events: a parent company’s distribution of shares in a subsidiary to its own shareholders or “partial initial public offerings,” in which a parent company sells a percentage of a subsidiary’s shares to the general public....

MONSANTO CO., $114.28, New York symbol MON, sells technology-based agricultural products, such as genetically modified seeds, to farmers, grain processors and food companies. It also sells weed- and pest-control products. In the second quarter of its 2014 fiscal year, which ended February 28, 2014, Monsanto earned $1.7 billion, up 12.6% from $1.5 billion a year earlier. Earnings per share rose 15.0%, to $3.15 from $2.74, on fewer shares outstanding. That beat the consensus forecast of $3.07. Sales gained 6.6%, to $5.83 billion from $5.47 billion. That also beat the consensus sales forecast of $5.8 billion....

CHESAPEAKE ENERGY CORP., $24.67, symbol CHK on New York, is preparing to spin off its oil-field services division into a separate, publicly traded company. The new firm would be called Seventy Seven Energy and would trade under the SSE symbol. Chesapeake would then hand out all of the new company’s shares to its shareholders in a tax-free transaction. The division, now called Chesapeake Oilfield, provides contract drilling, hydraulic fracturing, equipment rentals, trucking and other services. Combined, drilling and hydraulic fracturing supply over 75% of its revenue. Chesapeake Oilfield has around 71 active drilling rigs and nine fleets of pressure-pumping trucks for fracturing....

VERIZON COMMUNICATIONS INC., $47.56, New York symbol VZ, has completed its purchase of the 45% of Verizon Wireless that it didn’t already own from U.K.-based Vodafone Group (Nasdaq symbol VOD). The company now owns 100% of Verizon Wireless, which sells wireless services to 102.8 million subscribers in the U.S. In 2013, it supplied 67% of Verizon’s revenue and 81% of its earnings. Verizon paid $130 billion in cash and shares for Vodafone’s stake. To put that in context, Verizon’s market cap (or the total value of all its outstanding shares) is $196.7 billion....

WAL-MART STORES INC., $73.12, New York symbol WMT, reported better-than-expected earnings this week. However, the company’s U.S. big box stores are facing strong competition from online retailers, particularly for clothing and electronics. Harsh winter weather has also slowed customer traffic. In the fourth quarter of its 2014 fiscal year, which ended January 31, 2014, Wal-Mart’s earnings fell 22.2%, to $4.35 billion from $5.6 billion a year earlier. Earnings per share declined 18.6%, to $1.34 from $1.67, on fewer shares outstanding. Without several unusual items, such as costs to close stores in Brazil and China and restructure its Sam’s Club warehouse outlets, Wal-Mart earned $1.60 a share in the latest quarter. That beat the consensus estimate of $1.59....

GENERAL ELECTRIC CO. $27 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.2 billion; Market cap: $275.4 billion; Price-to-sales ratio: 1.9; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.ge.com) plans to spin off its North American retail finance business as a separate company. This business, part of its GE Capital subsidiary, provides credit card loans through a variety of retailers, such as Wal-Mart and J.C. Penney. It also loans money directly to consumers. GE will hang on the international portion of the retail finance business. The spinoff is part of the company’s plan to cut GE Capital’s assets to half of what they were prior to the 2008 financial crisis....

GENERAL ELECTRIC CO. $27 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.2 billion; Market cap: $275.4 billion; Price-to-sales ratio: 1.9; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.ge.com) plans to spin off its North American retail finance business as a separate company.

This business, part of its GE Capital subsidiary, provides credit card loans through a variety of retailers, such as Wal-Mart and J.C. Penney. It also loans money directly to consumers. GE will hang on the international portion of the retail finance business.

The spinoff is part of the company’s plan to cut GE Capital’s assets to half of what they were prior to the 2008 financial crisis.

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