Abbott Laboratories split

[HarmonyManagement]

Good morning,

Given the planned split in early 2013, what do you intend to do with your ABT shares in your portfolio? Thank you and have a nice rest of your day.

[Jerome]

(Boursier.com) — Abbott, the American laboratory, announced that its board of directors had just approved a plan to split its pharmaceutical activities into a separate company, named AbbVie Inc. The Illinois group specifies that an exceptional dividend will be proposed. Abbott shareholders will receive one share of the new entity for each share held. AbbVie will be listed on January 2 on the New York Stock Exchange, under the symbol "ABBV". Abbott will remain listed and will contain the nutritional activities, generic treatments and cardiac stents. AbbVie will focus on pharmaceutical operations, including the blockbuster Humira, the group's anti-inflammatory.

I'm going to hold on to my Abbott shares, as long as the dividend continues to grow next year (and beyond).
As for the new titles I will receive, ABBV, I have not yet decided whether I will sell them or not.

[birdienumnum]

It's quite interesting to note that spin-offs are quite trendy at the moment. There are big ones, like MDLZ and KFRT from KFT, and lesser-known ones, like Hyster Yale (HY) from Nacco (NC). Hyster Yale, an American manufacturer of "forklifts" is also an interesting value, "under the radar" as I like them.

Some activists like Nelson Pelz are adding another layer, since they are pushing certain boards of directors to split the company into several parts in which they have just acquired enough voting rights to obtain a seat on the board of directors (example at the moment: Ingersoll Rand).

Some spin-offs are done in preparation for the sale of a business that a company no longer wants. This was once the rumor regarding the spin-off of Mead Johnson (MJN) from Bristol Myers Squibb (BMY). To my knowledge, BMY still owns MJN…but who knows?

So the next big split is Abbott (maybe I'm forgetting others?). I have an ABT line, I'm happy with it, but to be honest, I don't know what the outcome will be. I don't know why they're doing this split. In my opinion, it will all depend on the value of the 2 separate entities compared to the combined value. If a company separates a rotten business, it will have a positive impact on the price of the original stock but the price of the new stock will go down. The case of Mueller Water (MWA), a spin-off of Walter Industries (WLT) is an example of an unsuccessful spin-off...it seems that Walter wanted to separate itself from its business by offloading a large debt to MWA.

Well, in short, I have not analyzed the ABT case and do not intend to do so since in any case it is, as is very often the case in the stock market, a question of perceived value rather than real value! Example at the moment: MDLZ is really not popular, everyone agrees that we should bet on KFRT and sell MDLZ. This encourages me to take an interest in MDLZ, when the dividend is confirmed and when there is the first dividend increase...maybe...we'll see.

[Jerome]

Glad you can post again birdie and thanks for the insightful comment.

[HarmonyManagement]

Hello and best wishes to all,

 

Following the Abbott split, Abbvie shares appear in my portfolio with a zero cost price, hence a significant latent +value, the PRU of ABT shares remaining unchanged, consequently showing a latent -value.

Is this normal during this type of operation?

 

[Jerome]

at my place it's +0% on ABT and -44% on Abbvie, banks do pretty much what they want apparently

It must be said that in Switzerland capital gains are not taxed so there are not too many consequences.

I had already noticed in the past some oddities in the methods of calculating capital gains.

[Jerome]

I have to say that this spin-off bothers me quite a bit. ABT and ABBV are certainly good stocks but their split takes them out of the scope of my Global Dividend Growers strategy. 

ABBV as a new stock has no dividend history and ABT due to the split sees its dividend cut in half. It is true that this last cut is only "virtual" due to the spin-off but it still bothers me.

In short, my brain is boiling over this case these days and I imagine all the plans, including settling these two lines.

Too bad Abbott didn't stay Abbott...

[Jerome]

My decision is made: I sold ABBV and bought the equivalent of ABT.

[st]

any clarification please?

Since Abbvie shares were received through a special distribution, there is dividend tax to pay.

But what is the cost price of Abbvie? The one of its IPO at the beginning of January? If I sell, I don't generate any capital gains?

THANKS

 

 

[Jerome]

Um, where are you based??? How can you be taxed on a dividend in this case? It is not an exceptional dividend but a spin-off, namely that the former Abbott company is split in two, at the same time as its capital, distributed between the two new companies ABT and ABBV. There is no reason to tax this separation.

 

I sold ABBV with a slight capital gain, which I partially ate up in sales and ABT buyback fees. It's not my usual style of trading like that, but if I want to be consistent with my strategy, it's the only way. And let's say it right away, spin-offs are fortunately rare, because I personally don't like them. In the end, by selling ABBV to buy back ABT, it's as if there had been a simple split of my ABTs, accounting-wise. Of course, the "ABT" stock is no longer quite the same as it was last year...

[st]

In France,
The bank wrote to me saying: that in accordance with article 120 3 of the Code of Civil Procedure, this distribution constitutes income declared in the IFOP which is subject to social security contributions and obligatory as a deposit by immediate debit from your cash account.
Once said, once done, it's up to me to sort it out.

If the form bothers me, I think they are right in substance (distribution of dividends in the form of shares).

[Jerome]

No, that's nonsense because the value of your original ABT share has been reduced by half, so it's not income! You've just cut your Camembert in half. You're not richer after this spin-off than before... Well, that may be "normal" in France, but it's not very ethical from my point of view...

[MDC]

Jerome said
Um, where are you based??? How can you be taxed on a dividend in this case? It is not an exceptional dividend but a spin-off, namely that the former Abbott company is split in two, at the same time as its capital, distributed between the two new companies ABT and ABBV. There is no reason to tax this separation.

 

I sold ABBV with a slight capital gain, which I partially ate up in sales and ABT buyback fees. It's not my usual style of trading like that, but if I want to be consistent with my strategy, it's the only way. And let's say it right away, spin-offs are fortunately rare, because I personally don't like them. In the end, by selling ABBV to buy back ABT, it's as if there had been a simple split of my ABTs, accounting-wise. Of course, the "ABT" stock is no longer quite the same as it was last year...

Good morning!

 

Looking for information on the possible price to pay, I found your explanation which corroborates my concept of a spin-off… i.e. division and not dividend… therefore no costs.

Except that in Belgium, a priori, the bank considers the operation as an exceptional dividend and deducts the equivalent of 25%!!!

As this is a very substantial financial 'drain', could you confirm that there was no need to apply these fees? Where can I find a black and white regulation to argue with the banker?

Thank you in advance for your help.

[Jerome]

This is theft and it is scandalous.

It's a spin-off, which should be indicated on the paper you received from the bank, and it means what it means.

retaining 25% on the value of the ABBV received is retaining 12.5% from the value of your old ABT, for a zero gain since the company has just been split into two entities

if you have a cake and you cut it in two, you don't have more to eat at the end... in this case you even have less since a freeloader came to invite himself to the "feast" without being invited.

I hope your bank doesn't do this during a split as well... but it's not that different... you inherit additional shares, but the total capital is still the same

show your banker the ABT stock chart... it says a lot... if he still wants to tax you for the "gain" on the new ABBV shares, then he should compensate you for the "loss" on your ABT shares...

we think we're dreaming

 

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