Sarcosine Chemicals Corp. issues stock in one of its operating units and sets it up as a separate company called Prussic Corp., with its own board of directors and corporate officers. Sarcosine Chemicals Corp. then distributes the stock in Prussic Corp. to its existing stockholders. Which of the following forms of divestitures does this scenario exemplify?
A) A spin-off
B) A tender offer
C) A carve-out
D) A stock swap

Question

Quizplus · Accepted Answer

A spin-off occurs when a company creates a new independent company by distributing new shares of its existing business to its shareholders, as described in the scenario.