Australia:Defying a global spike in acquisitions, some of the country’s biggest and oldest companies are trying to shrink to greatness. Commonwealth Bank, Wesfarmers and Telstra are potentially spinning off assets collectively valued at $59.5 billion in as little as three years — more than the tally for the whole of the past decade.
After lifetimes spent scaling up, these mainstays of the market are slimming down in a bet that getting rid of problem businesses and having simpler and more focused operations can deliver out-sized returns. That’s handing choice, and potentially wealth, to investors as parent companies splinter into separate entities. In the US, stock gains by spun-off businesses this decade are more than double those of the S&P 500 Index.
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After being “starved of capital and love” by their former parents, carved out businesses often get a new lease of life, said Hugh Dive, chief investment officer at Atlas Funds Management. “Suddenly, the management teams care more and they’re valued differently.”
CBA will next year spin off its tarnished wealth-management business, valued at as much as $10 billion, and National Australia Bank has said it may do the same as the lenders exit a sector infected by corporate scandal.
