Catching Up: Hertz and Danaher Complete Their Spinoffs

July 4th week is a good time to catch up on some recent spinoff transactions.

Last week Hertz (HTZcompleted the separation of its equipment rental business Herc Holdings (HRI). This one was a bit tricky mechanically and here is how the transaction went down:

To effect the separation as part of a tax-free spinoff, Hertz Global Holdings stockholders as of the June 22, 2016 record date received shares in Hertz Rental Car Holding Company, Inc., on June 30, 2016 at a rate of one share for every five shares held. Hertz Rental Car Holding Company, Inc. has changed its name to Hertz Global Holdings, Inc., and begins trading “regular way” today on the New York Stock Exchange under the symbol “HTZ.”

The shares of the former Hertz Global Holdings, now known as Herc Holdings Inc., were adjusted for a 1-for-15 reverse stock split that was implemented immediately after the separation. Herc Holdings shares now represent ownership of the equipment rental business, which will operate through Herc Rentals, on a stand-alone basis.

To make it simpler, a shareholder with 15 shares of HTZ pre-spinoff should have ended up with 3 shares of the new HTZ and 1 share of HRI. Additionally, as part of the transaction, Hertz received ~$2b in proceeds which it will use to pay down debt and repurchase shares. In addition to shoring up its finances, the rental car company will now be solely focused on its core business and recently signed supply agreements with car sharing companies such as Lyft. It’s targeting EBITDA margins of 16-18% within 5 years. The equipment company will have to battle slowing markets and economies in order to turn around its fortunes.

That wasn’t the only spinoff to be completed in the past week or so. Danaher (DHR) completed the spinoff of Fortive (FTV), which is comprised of Danaher’s Test & Measurement segment, a good chunk of its Industrial Technologies segment and its Retail/Commercial Petroleum platform. Shareholders should have received 1 share of FTV for every 2 Danaher shares owned. This is a spinoff in which many investors are interested because Danaher has an incredible track record of creating shareholder value. Can the magic stay alive and possibly be spread among two companies?

Fortive will join the S&P 500 so there is no index changes as a result of this transaction, although Danaher is a S&P 100 constituent as well while Fortive is not. Interestingly, Fortive will take Columbia Pipeline Group’s spot in the index. Columbia became an independent company during last year’s famous ‘Summer of Spin’, but is being acquired by TransCanada (TRP). Of course it’s not the first ‘Summer of Spin’ member to get acquired – that honor belongs to Baxalta, which was scooped up by Shire (SHPG) in a dramatic courtship earlier this year.

Disclosure: Author holds no position in any stock mentioned.

2 thoughts on “Catching Up: Hertz and Danaher Complete Their Spinoffs

  1. kantilal Patel

    If you have 15 shares of HTZ having cost base $249.30, you get 1 share of HRI and 3 shares of new HTZ. what is your cost base for HRI and new HTZ?

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