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Asset Redeployment: Trans World Corporation's Spinoff of TWA
Gordon J. Alexander, P. George Benson and Elizabeth W. Gunderson
Vol. 15, No. 2 (Summer, 1986), pp. 50-58
Stable URL: http://www.jstor.org/stable/3664978
Page Count: 9
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Trans World Corporation (TWCp) decided to spinoff Trans World Airlines (TWA) during the fall of 1983. TWCp's spinoff is particularly interesting because, unlike most spinoffs, both TWCp and TWA shares, along with some of their senior securities, were publicly traded prior to the spinoff announcement. This permits analysis of the securities of both companies around the time of the spinoff announcement. In addition to performing such analysis, this paper explores the possible motivations for spinoffs in general and for TWCp's spinoff in particular. The findings indicate that, while wealth transfers took place, this particular spinoff was primarily motivated by a need to restructure union contracts. Thus, the evidence supports recent suggestions in the popular press that parent company shareholders view such restructuring transactions as being of significant value.
Financial Management © 1986 Financial Management Association International