Overview
Bloomberg BNA quoted Steptoe partner Lisa Zarlenga in a July 15 article titled “IRS Adds Certainty for Unwinding Control After Spinoff.” The article discusses new IRS guidance that provides companies seeking to spin off a unit more certainty that their transaction will qualify as tax-free if the spunoff unit changes its voting structure or is acquired. A company might recapitalize to create two classes of stock, including one with more voting power, so that the distributing company gains control prior to a spin.
Ms. Zarlenga says, “Companies have figured out that the market doesn't really like this high vote, low vote stock, so the companies tend to do the spinoff and then they undo the recap, so they go back to one class of stock.”
The full article can be read at Bloomberg BNA (subscription required).
