Conglomerates often unlock shareholder value by either divesting a slow-moving segment or spinning off an unrelated segment to concentrate their efforts on their core businesses. Recently, Kimberly-Clark (NYSE: KMB ) revealed its intent to spin-off its health care business to focus on its larger personal care, consumer tissue, and K-C professional segments. The company will make a tax-free distribution of 100% of the new health care company's stock to existing Kimberly-Clark shareholders.
In 2012, the health care business generated $1.62 billion in sales, or 7.7% of total sales, and $229 million in operating profit, which accounted for 8.5% of total profit. Compared to other business segments, the health care business had the lowest return on assets. After spinning off the health care business, Kimberly-Clark can focus on its more profitable segments: personal care, K-C professional, and consumer tissue. The health care spin-off could drive Kimberly-Clark's long-term shareholder value as the company can focus its efforts on growing other consumer businesses. Kimberly-Clark could fit into the long-term portfolio of an income investor with its juicy 3% dividend yield.
Source: Motley Fool
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