Big-Name Stock Spinoffs Are Going Mainstream. Here’s Why.

This is commentary by Allan Sloan, an independent business journalist and seven-time winner of the Loeb Award, business journalism’s highest honor.

In addition, I traded some of my Johnson & Johnson stock to J&J in return for shares in Kenvue , which owns J&J’s former consumer health business. This was an exchange offer rather than a spinoff, but my portfolio still ended up with a stock that I didn’t buy. Other household names like Kellogg and 3M have either done spinoffs this year or are planning to do them.

Kellogg is trying to split the difference. Consumers will still see the iconic name at the grocery store, but those of us who are investors, too, will have to learn to live with Kellanova , another attempt to sound new with old, Latin-sounding words. It keeps the ticker K and the company’s snack foods. The cereals business is in the spinoff, WK Kellogg , named for company founder Will Keith Kellogg.

Spinoffs are tax-free to the spinner, which is one reason that they’re so popular with U.S. businesses. They’re also tax-free to the recipient. Second, Osman says, is that it has become easier for parent companies to raise capital for to-be-spun-off companies than it once was, which makes the spinoffs more attractive. In the past, only a handful of big investors were interested in providing financing to spinoffs. These days, Osman says, private-equity firms, hedge funds, and mutual funds are willing to do it.

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