Evaluating spin-off offers as a common stock holder

[sengsational]

I've had common stock that was given to me years ago, and every so often, I get a thick envelope in the mail that describes in great detail, a spin-off deal. Usually there is nothing to choose...except maybe how you want your new shares (certificate or not), fractional shares details, and stuff like that. The strategy (that I have not done real well with) is whether to sell the shares of the spin-off (I didn't, but should have). Well, I got a thick envelope and this thing is not a pure spin-off , and I wonder what the smart folks here would do.

Dow Chemical shareholders, as far as I can tell, can either keep their shares, or convert some or all into a thing that will eventually become Olin common stock. Of course they have a 275 page book with a bunch of details, and no where that says in plain language "option A has these advantages and disadvantages, whereas option B has these advantages and disadvantages"

It's not a whole lot of money, so it's not worth hiring a consultant, but it. bugs me to just fumble into one path or the other. Research so far has news reports, but no ideas for the stockholders, or what the smart money is doing. What would you do, or what have you done in the face of something like this?

 

[Free To Canoe]

Don't have 1st hand knowledge here but it may be interesting to see what happens.

 

[MooreBonds]

Dow Chemical shareholders, as far as I can tell, can either keep their shares, or convert some or all into a thing that will eventually become Olin common stock. Of course they have a 275 page book with a bunch of details, and no where that says in plain language "option A has these advantages and disadvantages, whereas option B has these advantages and disadvantages"

I am also a DOW holder (only about $4k worth). I haven't read through the offer much, but would rather keep DOW than go with the concentrated, slow-growth market of what they are merging with Olin.

So, I'm leaving my holdings as-is and not accepting the offer.

 

[harley]

Most of my best financial decisions have involved not doing anything.

 

[NW-Bound]

I also own some DOW shares, and this makes me go look in my email. Yes, there's a message about this. And it says

The Dow Chemical Company (TDCC), through a series of transactions (mergers), is offering to exchange shares of its common stock for all common shares of Blue Cube Spinco Inc. (Splitco common stock) owned by TDCC for shares of common stock of TDCC. Upon completion of the transactions, each outstanding Splitco common share will be converted into the right to receive shares of Olin Corporation (symbol:OLN).

For each $1.00 of TDCC common stock accepted for exchange, holders will receive approximately $1.11 of Splitco common stock, subject to an upper limit of 2.9318 shares of Splitco common stock per share of TDCC common stock. Cash will be paid in lieu of any fractional shares. The exchange offer does not provide for a minimum exchange ratio. However, if the upper limit is in effect, you will receive less than $1.11 of Splitco common stock for each $1.00 of TDCC common stock tendered, and you could receive much less.​

Looks too complicated for me. If I want Olin stock, I would go out and buy it myself. So, for no action on my part the default is to keep Dow stock. Problem solved.

 

[sengsational]

Thanks all for the ideas. The way the massive packet documents read, they make it sound like taking action is the only way to proceed. I figured out that Dow is selling only 3.3% of their assets in this deal. A higher % of revenues, like 8%, but still, its not like Dow will be all that different than it has been. If the stock was good enough in the past, it should be good enough without this division.

OTOH they need to attract takers or the deal won't work...there must be sweeteners in the reams of fine print.

I just thought of an idea for how to help decide...call your mutual fund and ask how they are handling it.

 

[MooreBonds]

OTOH they need to attract takers or the deal won't work...there must be sweeteners in the reams of fine print.

NW Bound posted the excerpt from the prospectus that you will get up to $1.11 in Splitco stock for every $1.00 in DOW.

However, the ratio is dependent upon how many take the deal, so you are taking a gamble in how much Splitco you end up with (possibly $1.11, but possibly closer to $1.00).

 

[jebmke]

Most of my best financial decisions have involved not doing anything.

Mine too. However, I do watch for tax events. Last year a legacy stock held in wife's brokerage was about to be merged out for cash. Donated the whole thing to our DAF before the merger was done in order to avoid the tax on the gain.

 

[Philliefan33]

I am also a DOW stockholder. I've decided that the potential upside of Olin is not significantly different than Dow, so I'm doing nothing. IMO there's no need to complicate things -- I'm in the process of simplifying our investments.