Advantages include greater management focus and potential shareholder value

UNBUNDLINGS OR spin-offs are transactions in which a company with various lines of business distributes its shareholding in a subsidiary/ies that either do not form part of its core operations, or can be run completely separately to its shareholders.

Such a disposal is different from a sale of the business, because it is effected by splitting out the business and giving shareholders ownership of the shares in the separated business on a pro-rated basis.

This is done for a number of reasons, but usually involves an attempt by management to focus on its core operations, and/or to unlock value for shareholders.

How this works in practice
Company A announces that it will un-bundle its shares in its subsidiary, Company B, to shareholders in the ratio of 0.5 Company B shares per 1 Company A share held. An investor who holds 100 shares in Company A will receive 50 shares in Company B.

On the last day to trade to participate in the unbundling, Company A was trading at …