stephen.jacobs

Halliburton: Is Its Discount Warranted?

HAL's Chairman and CEO Dave Lesar, an ex-Arthur Andersen managment consultant, stated in the recent 4th quarter earnings call on 26 January that the planned spin-off of KBR may not occur as proposed. He said instead a possible "split-off", wherein HAL shareholders do not get KBR shares distributed as a tax-free dividend, but will be allowed to trade their HAL shares for KBR shares, is being considered. He gave some reasons but they appear rather lame to me, such as portfolio reallocation tax benefits if you want to concentrate only on one company (to major shareholders' benefit?) and accreting KBR's earnings multiple to add one-time to HAL's EPS. Doesn't this greatly reduce the value of the separation to existing HAL shareholders? Why would they do this?