The Financial Post reports in its Saturday, Oct. 25, edition that divestitures are all the rage right now. The Post's David Pett writes that companies are mulling divesting assets in an attempt to create shareholder value.
Mr. Pett says the strategy does not always work as planned, but investors reap the benefits from asset sales, spinoffs, carve outs and other types of corporate divestment often enough that the bloodletting should become more pronounced. The trend has been on display at EnCana, where it spunout PrairieSky Royalty. Suncor Energy, Talisman Energy and Devon Energy have completed large sales this year too. In the pipeline, companies such as Barrick Gold, BHP Billiton and International Business Machines, which already announced the sale of its chip division last week, are being bandied about as companies looking to get even leaner. To date, share performance in many of these companies has somewhat disappointed investors, but that is not likely to dampen the growing appetite for divestitures. For one thing, company executives and investors no longer view divesting as a sign of weakness and see it as a legitimate way to improve profitability in the long run. One observer calls "shrinking to grow."
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