Not all spinoffs help investors

Article Excerpt

These two companies hope to boost investor value with spinoffs. However, their deep-rooted problems will more than offset any short-term benefit for investors. L BRANDS INC. $11 is a sell. The merchant (New York symbol LB; Consumer sector; Shares outstanding: 276.5 million; Market cap: $3.0 billion; Dividend suspended in March 2020; Takeover Target Rating: Medium; www.lb.com) owns two retail chains: Victoria’s Secret stores (which sell lingerie); and Bath & Body Works outlets (personal-care products, including soaps and shampoos). The company recently agreed to sell 55% of its struggling Victoria’s Secret chain to private equity firm Sycamore Partners for $525 million. It planned to apply that cash to its long-term debt of $5.5 billion (as of February 1, 2020). However, as a result of the COVID-19 lockdowns, Sycamore and L Brands agreed to cancel the deal. L Brands now plans to split its two chains into separate firms. It will announce details of the plan in the next few weeks. Bath & Body Works is doing better than Victoria’s Secret,…

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