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Homework answers / question archive / 1) A listed company proposes to invest into a new business, grow it and then look to unlock the value

1) A listed company proposes to invest into a new business, grow it and then look to unlock the value

Finance

1) A listed company proposes to invest into a new business, grow it and then look to unlock the value. This can be achieved through

(a) Investing in a subsidiary and spinning it off at a later date

(b) Growing the business as a division and demerging it

(c) Investing in a subsidiary and rolling it back at a later date

(d) Growing the business as a division and invite private equity investment

(e) Growing the business as a division and convert itself into a JV

(f)Investing in a subsidiary and go for equity carve out.

2. If a holding company spins off its subsidiary and then merges it with itself, the share swap is made between

(a) The holding and the subsidiary companies.
(b) The shareholders of the holding company and the subsidiary company.
(c) The holding company and the shareholders of the subsidiary company.
(d) The shares held in the subsidiary with additional shares in the holding company.
(e) The shares in the holding company are exchanged for shares in the subsidiary company,

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ANSWER

1.

(b) Growing the business as a division and demerging it

this can be achieved by growing a business and then demerging it so that a value is created to exhibit to shareholders

2.

(e) The shares in the holding company are exchanged for shares in the subsidiary company

In a spin-off, the parent company distributes shares of the subsidiary that is being spun-off to its existing shareholders on a pro rata basis, in the form of a special dividend.