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Non-Tech : SPIN-OFFS "secret hiding places of stock market profits" -- Ignore unavailable to you. Want to Upgrade?

To: Terry Maynard who wrote (80)	2/9/1998 11:02:00 PM
From: Frank Perlmutter	Read Replies (3) \| Respond to of 1185

Campbells and Vlasic... After looking at Campbells and its spinoff, Vlasic, this situation seems to be shaping up to be a classic Greenblatt special situation. After starting my analysis, I found that the Motley Fool had already done a thorough study on Campbells for purchase in their portfolio. I would highly suggest reading the information contained in their reports-- it provides an excellent discussion on the company and a valuation of both the parent and the spinoff. The main questions about the spinoff: 1. Why is Campbells spinning off Vlasic? - To separate the lower margin businesses (all the Vlasic ones) from their core, higher margin line (soup, etc.) The bottom line results should show over the year for Campbells. - Escape taxability-- Throughout all of the press releases, Campbells mentions that the company is awaiting IRS approval that this is a tax free transaction. They have been divesting their non-strategic businesses for awhile now, normally though direct sale. These are simply too large to sell. Also, possibly a way to sell businesses without being taxed-- spinoff then a takeover, perhaps? 2. Will institutions dump the spinoff? From Greenblatt's reasoning), YES because... - Campbells is part of the S&P 500, Vlasic is not (ranks 750-- according to press release). - The company is relatively small. It represents less than 10% of the parent. - Institutions want to own the high margin businesses, not the sub-standard ones. 3. At what price should Vlasic be priced? Based on... - Motley Fool valuation of between $1.42 billion to $2.84 billion for an average valuation of $1.98 billion - 458 million shares outstanding of Campbells If it's distributed on a 1 Vlasic:1 Campbells basis then: $4.32 If it's distributed on a 1/2:1 then: $8.64 and so on... 4. What are executive holdings in the spinoff? How much is insider compensation linked to the performance of the spinoff? At this point, I am not sure. I guess we can only wait until the prospectus comes out. I'll be looking at how much of executive compensation (in both the parent and the spinoff) is in stock options for the spinoff and if there is a plan for insiders to acquire stock/options at a later period. 5. If there are stock options, when are they priced? Also, no answer until the prospectus. Until the price of the options is set, the insiders who own the options have no reason to promote the stock. From the indicators that seem to show that institutions may immediately dump the stock, it seems in the best interest of insiders to initially price the options at a low price or to wait to price the options until a later date. If they set the price before the spinoff, they may have something up their sleeves to pump up the price. I'll be looking for more answers in the prospectus. Frank