There are a number of spinoffs scheduled to be completed at the end of this month (October) or in early November and naturally, there are a few scheduled changes to the S&P indices as a result. Here is a summary of the changes which will occur over the next week or so:
- HCP Inc (HCP) is spinning off Quality Care Properties (QCP-WI), a skilled nursing and assisted living facility focused REIT. Post-spin, the new company will be added to the S&P MidCap 400 Index, replacing apparel company Guess? (GES), which will be added to the S&P SmallCap 600 Index. Harte-Hanks Inc (HHS) will be dropped from the SmallCap Index as a result of the game of musical chairs. HCP will remain in the S&P 500 index.
- YUM Brands! (YUM) is finally spinning off its Chinese operations, YUM China, at the end of the month. YUM Brands will remain in the S&P 500, but the new company is not eligible to join the S&P 500 Index because it is domiciled in China. Interesting.
- Alcoa (AA) is undergoing a transformation by splitting its upstream and downstream operations. The current Alcoa parent company will change its name to Arconic post-spin and change its ticker to ARNC (now ARNC-WI). Arconic will remain in the S&P 500, but will now be classified within the Aerospace & Defense sub-industry, more properly representing its new focus. The ‘new’ Alcoa spinco will not be added to the S&P Composite 1500 at this time, but lets see what happens during the next commodity price boom.
- Johnson Controls (JCI) completed its merger with Tyco last month and is now set to distribute its seating business, Adient plc (ADNT-WI), to shareholders on October 31st. While the new company is based in a country with a more favorable tax regime, don’t forget that this particular spinoff will be taxable. Johnson Controls will remain in the S&P 500, but will have its sub-industry classification changed to building products to better describe its post-merger and post-spin operations. Adient plc will not be added to the S&P Composite 1500.
As we often note, investors watch index changes related to spinoffs for potential forced selling and attractive entry prices. There are quite a number of S&P 500 Index companies with spinoffs this month whose spincos will not be added to the ‘big boy’ index (or in some cases, any S&P Index at all!) so there might be a few worth watching if interested.
Disclosure: Author holds no position in any stock mentioned.