Assume TD sells 20% of Waterhouse in an IPO at $10 per share. TD gets this $10 per share for the number of shares it sold, to use any way it sees fit. Then suppose the IPO were very successful, and it went from $10 to $30 per share. TD's remaining 80% share would then be worth a lot more, which (1) to some extent would be reflected in increase in TD stock price, and (2) which TD could tap by selling part of all of their remaining 80% at $30 per share. So doing an IPO puts $$ into TD, the remaining corporation.
Now consider a spinoff of 100% of Waterhouse to shareholders, (just like the ATT spinoff of LU some time back.) TD, the corporation would get nothing for this at all. In fact, it would just serve to reduce their total market capitalization. The only benefit financially to TD would be that Waterhouse would take some debt with them. But they would take a lot more in assets.
LU has done very well as a stand alone company, true. And T sharehodlers who continued to hold their LU shares after the spinoff have benefited greatly. But T, the company, has not benefited financially by LU being spun off (other than possibly intangibles like LU being now able to sell with out conflict to T competitors, which was difficult before the spinoff). The spin off of LU by T (though I agree it was an excellent decision and in the best interests of shareholders) made T a smaller co, and did not put any $ in T's coffers, either at the time of the spin off, or later.
A spin off of company divisions to shareholders is a way to reduce the overall size of your company. I suspect TD is not interested in doing this. On the other hand, you never know. Bank of America bought Schwab some years ago, then sold it back (at a good premium, but nothing like it's current value of course) to Charles Schwab after a few years. The rest, as they say, is history. At that time, of course, it wasn't so clear that discount brokerage was going to be such a good business. |
