The board of directors of a firm approves an exchange offer in which their shareholders are offered stock in one of the firm's subsidiaries in exchange for their holdings of parent company stock. This offer is best described as a
A) Split-up
B) Split-off
C) Equity carve-out
D) Spin-off
E) Tender offer

Question

Quizplus · Accepted Answer

A split-off is an offer in which the parent company offers to exchange the shares of a subsidiary company with the shares of the parent company held by the investors. Therefore, the described exchange offer is best described as a split-off. A split-up involves the division of a company into smaller entities, an equity carve-out is the sale of a minority stake in a subsidiary company, a spin-off is when a company separates a business unit and makes it a separate entity, and a tender offer means a third-party offers to purchase shares of a company at a premium price to gain control of the company.

The Board of Directors of a Firm Approves an Exchange