BHP Billiton Limited (ASX: BHP) announced this month it plans to spin off a number of its businesses outside of its main "four pillars" ( iron ore, copper, coal and petroleum). The new company could be worth as much as $14 billion. BHP thinks this is the best way to maximise shareholder value as it restructures to increase margins and profits.
The company will update the market with further details in November and has a plan to list the demerged company around the middle of 2015.
We can't say yet how good of a deal it could be for new investors to buy into the proposed spin-off company, but we can look at a recent example and see how it may be possible to make money from a demerger.
Brambles Limited (ASX: BXB) and Recall Holdings Ltd (ASX: REC)
Recall Holdings is a provider of information management for business records and documentation receival, storage and secure destruction and disposal. It was demerged from Brambles in December 2013. Recall operates in 23 countries with leading positions in North America, Europe, Brazil, Australia and New Zealand. About 41% of its revenue comes from the Americas.
Since listing, the stock is up 16.4%, which is higher than the 9.3% gain of the S&P/ASX 200 Index (ASX: XJO) (Index: ^XJO) over the same period.
Brambles, the global supply-chain logistics service provider well-known for its CHEP brand pallets and containers, has only gained 5.6% in share price since the demerger. When it reported a 5% increase in full year earnings per share (EPS) this month, the market received it lukewarmly.
However, analysts are tipping it will see solid growth over the next few years because it can focus on its core logistics business. So you should watch for Brambles to pick up from here on out.
