Split-Off

Brief Definition

A split-off is a type of corporate restructuring where a company creates a new, independent entity and offers its shareholders the option to exchange their shares in the parent company for shares in the new entity.

Further Explanation

A split-off is a type of corporate restructuring where a company creates a new, independent entity and offers its shareholders the option to exchange their shares in the parent company for shares in the new entity. Unlike a spin-off, where shareholders receive shares in the new entity without giving up any of their shares in the parent company, a split-off requires shareholders to choose between holding shares in the parent company or the new entity.

Example:
Suppose AAA has two main divisions: Software and Hardware. AAA decides to split off its Hardware division into a new company called BBB. Shareholders of AAA are given the option to exchange some or all of their AAA shares for shares in BBB. Those who participate in the exchange will now hold shares in BBB, while those who do not will retain their shares in AAA. This allows shareholders to choose which company they prefer to invest in.