Professor Ted Azarmi

David Marutschke and I present a theory for making corporate restructuring and two-step spinoff decisions based on the consequences of the expected future change in value of the claims of various stakeholders when there is asymmetric information amongst stakeholders. In particular, a one-step spinoff may impair asset claims of a claimant class (e.g. bondholders, bankers, lawsuit claimants, workers, managers, etc.) The impaired asset claim problem may lead to the imposition of additional costs that effectively block a value-increasing spinoff. A two-step spinoff generates value by using the market information generated after (the first-step of) a minority equity carve-out to overcome this “claimant asset impairment problem” in two-steps. We apply our theory to examine the changes in shareholders’, managers’, and lawsuit claimants’ asset values resulting from the 2007 Kraft spinoff. We develop a positive multi-dimensional asymmetry theory with practice-related prescriptions for use in restructuring decisions. We consider the Japanese, German, and European restructuring regulations and taxation. In particular, we study Japanese restructurings after the 2001 and 2007 regulatory changes. We also derive results relevant to the German “Spinoff tax uncertainty”. Specific tax and regulatory recommendations based on the theory can be prescribed.