On March 20, 2014, Li & Fung announced that it had made an application to the Hong Kong Stock Exchange for the listing of its global brands and licensing business. The new company, Global Brands Group (“GBG”), will be listed by way of a 100% share distribution in specie to existing shareholders. The record date for the spin-off is July 7, 2014. Thus, the last day of trading Li & Fung shares cum-distribution is July 2.

Global Brands Group will be a consumer goods wholesaler with a portfolio of licensed and controlled brands. Due to its operating model, Global Brands Group has high SG&A expenses and low profitability margins. It does, however, generate much cash flow from its operations, most of which was spent in the past years on acquisitions. Going forward, the company aims to focus more on organic growth, which will increase its free cash flow, and expansion in China, where management believes GBG could greatly benefit from the transition of the economy to consumer oriented from exports focused. The stock could be valued between HKD 2.3 and HKD 2.8. Proof of strong execution and solid expansion in Asia—with sales growing more than 50% per year—could lead to a valuation close to HKD 4 per share.

Li & Fung post spin-off will comprise its Trading and Logistics segments, along with the private label business of the Distribution segment. These are more commoditized businesses, with lower fixed expenses. While Li & Fung operates in the consumer discretionary sector, which by definition is more volatile, it has a cost and revenue structure (i.e., commissions/agency services and high variable versus fixed costs) that make it more resilient during downturns. Thus, investors could require a lower rate of return (i.e., higher valuation multiple) compared to more volatile consumer cyclical companies. Moreover, its cash flow generation will be augmented, as in the past it was subsidizing GBG’s expansion efforts, and it will be more than able to continue paying its existing dividend. The resulting fair value range is HKD 8.6 to HKD 12.6.

Li & Fung will split into two strong businesses, pursuing a transaction with a solid rationale that can enhance shareholder value. It should also be noted that management and employees have an additional incentive as most of the stock options awarded to them are deep out of the money, with most having a strike price in excess of HKD 20. Given the sum-of-the-parts valuation range of HKD 10.9 to HKD 15.4 and the alignment of interests among management and shareholders, Li & Fung shares are recommended for purchase prior to the spin-off.

On July 14, 2011, Ralcorp Holdings, Inc. (NYSE: RAH) announced that its Board of Directors had approved the spin-off of its branded cereals business via a tax-free distribution to shareholders. RAH will distribute at least 80% of the equity of Post Holdings, Inc. in a transaction that is expected to be completed near year-end 2011. The spin-off will require SEC approval and an affirmative IRS ruling. The new company has filed for a listing on the New York Stock Exchange under the ticker ‘POST.’

To understand the motives for the transaction, one must look at RAH’s history of acquisitions. Since 2000 the company has acquired 18 companies, the majority of which were small, primarily private-label food manufactures. The notable exception being the $2.6 billion Post Cereals acquisition in 2008. The timing of this acquisition has proven ill as the economy went into a recession, consumer spending pulled back and input costs have risen sharply. The net result has been declining sales and margins at the branded segment while the private label segments have fared better.

A refocus on RAH’s core private label business via shedding the underperforming Post business appears to be at the heart of this transaction. Looking post-spin it is likely that $1.1 billion in cash RAH will receive from the transaction will fund a return to smaller private-label acquisitions fostering earnings growth. Post will attempt to leverage existing brands as it attempts to reverse the negative sales trends. One could argue that combining the lower-margin private label business with the higher-margin yet currently struggling operations of the branded cereal products obscures true performance and results in an unwarranted valuation discount. In fact, pre-spin RAH shares currently trade at an approximate 20% discount to peers based on consensus fiscal 2012 EBITDA estimates.

One could view RAH’s current management remaining with the parent and the saddling of POST with $1.1 billion in debt while RAH reaps the cash as an indication of the near-term prospects. In this light, it could be said that following the transaction RAH may be better positioned for the current environment and may receive a higher valuation multiple. POST shares, being the leveraged entity and with a less clear path to earnings growth may initially be out of favor and provide longer-term value investors with attractive entry points.

Given this, one could assign a fair value estimate of $91 per share to RAH prior to the spin-off. Further, for longer-term holders, purchasing RAH shares offers upside potential to this fair value estimate. Revenue growth and margin expansion may result in a sum-of-the-parts valuation for the two companies of $103 over the next three to five years. With this in mind, shares of RAH are recommended for purchase ahead of the spin-off transaction.

On October 18, 2011, The Williams Companies (NYSE: WMB) announced a revision to its plan to separate into two separate publicly traded companies. Previously WMB intended to carve out as much as a 20% interest in its exploration and production assets through an initial public offering in 2011 followed by a tax-free spin-off of the remaining shares to WMB shareholders in early 2012. However, given the ongoing instability of equity markets, the company now intends a full spin-off of its E&P assets, to be called WPX Energy Inc., to shareholders at year-end 2011. The stock is expected to trade on the NYSE under the ticker symbol ‘WPX’ following the separation. The spin-off will require SEC approval and an affirmative IRS ruling. The separation will allow management to focus on meeting growing demand in its separate businesses. WPX can base spending priorities on developing and producing oil or natural gas assets, while Williams can meet changing needs for US commodity processing and transportation as domestic gas production reaches record levels.

The E&P assets include natural-gas reserves in the Rockies’ Piceance Basin and Appalachia’s Marcellus Shale as well as the oily Bakken Shale in North Dakota. WPX also has Argentine hydrocarbon production through its 69% interest in Apco Oil and Gas International (NASDAQ: APAGF). Those assets are gassy and could receive a discount from the market following the transaction to reflect the hydrocarbon mix. However, that potential discount may present an opportunity for investors if and when natural gas prices improve or a larger player considers making an offer for the assets, as BHP Billiton (NYSE: BHP) did for Petrohawk earlier this year. (This is not to argue that WPX’s assets are as geographically ideal as Petrohawk’s assets were, but simply that natural gas resources could be takeover candidates during a period of historically low oil-to-natural gas price differentials.)

Following the spin-off, WMB will hold a 75% interest, including the 2% general partner (GP) interest, in Williams Partners LP (NYSE: WPZ), a master limited partnership (MLP) with assets in the Rocky Mountains and on and offshore Gulf of Mexico. Assets include gas gathering, processing, and treating facilities, as well as pipelines. Capital expenditures may be heavy in the next three to five years given ongoing demand for new oil and natural gas infrastructure. WPZ operates the largest US natural gas pipeline, Transco, which runs from the Gulf Coast through the Eastern Seaboard. The company is building out gathering pipeline in the rapidly expanding Marcellus Shale of Pennsylvania and also has pipeline and processing equipment in the Gulf Coast and the Rockies, an interstate pipeline in the Pacific Northwest, and processing assets in Canada. All the assets are housed within the MLP, with the exception of the olefins operations and Canadian operations, which could not qualify for inclusion in WPZ.

WMB has announced plans to raise its quarterly dividend to $0.25 per share starting with the December 2011 payout, and the company has targeted double-digit dividend expansion post separation. The opportunities seem substantial, but the risk to investors will be assessing WMB’s ability to hike the dividend while also spending aggressively and wisely to meet growing infrastructure needs. Assuming management makes wise investment decisions and builds out assets in growing production basins, one can reach a fair value of $34 per share pre-spin on a sum-of-the-parts valuation. As a result, while recognizing certain risks going forward, the stock is recommended for purchase prior to separation given the more than 10% potential upside to the current share price and 4.5% dividend yield expected for WMB post separation.

On September 26, 2011, AMR Corporation (NYSE: AMR) filed an amended Form 10 Registration Statement with the SEC to separate AMR Eagle Holding Corp., its wholly owned regional carrier, in a tax-free spin-off to shareholders. A distribution date has not been set. The SEC still must declare effective the Registration Statement to conclude the regulatory review. Management also awaits an IRS private letter ruling on the tax-free status of the distribution.

Upon separation AMR and Eagle will enter into agreements for both air services and baggage handling, which will provide a stable base business for Eagle post-spin while giving both entities increased flexibility. American Airlines will be able to expand operator diversity within its regional feeder business, while Eagle should see increased opportunities to provide regional air service to a wider base of mainline carriers.

The airline industry remains highly competitive and, per industry data, is seeing signs of demand deterioration. Further, mainline carriers have seen increasing competition from low-cost carriers, placing varying degrees of strain on profitability in light of high operating costs in what is historically a very capital-intensive business with razor thin, if any, margins. AMR and Eagle are both at a competitive disadvantage versus peers following industry bankruptcies and consolidation that have resulted in competitors becoming more efficient operators. The high cost structure of both AMR and Eagle is due in large part to current organized labor contracts.

In a difficult operating environment, it would be reasonable to assume that a company such as AMR and, for that matter Eagle, which are at a competitive disadvantage due to cost structures, will face an increasing degree of difficulty competing for business. Investors have taken an increasingly skeptical view of AMR’s viability as an ongoing concern. Given the competitive environment and the headwinds the entities face on the way to sustained profitability, shares of AMR are not recommended for purchase, as downside risks from potential insolvency outweigh upside potential. This recommendation is based on respective fair value estimates of $2 and $9 for AMR and Eagle, noting that our post-spin Eagle valuation assumes a distribution ratio of 1:10, as Eagle is expected to have a low share price post spin-off.

On April 7, 2011, Expedia Inc. (NASDAQ: EXPE) announced that its Board of Directors had approved the spin-off of the company’s TripAdvisor unit to shareholders, expected to be completed by the end of 2011. The spin-off, through a reclassification of stock, has been set at one share of TripAdvisor for every share held of EXPE, following a reverse stock split immediately preceding the separation. The transaction, expected to be tax-free to shareholders, still requires an affirmative IRS ruling, and a shareholder vote scheduled for December 6, 2011. The registration statement has been declared effective by the SEC. The company has filed for a listing on the Nasdaq under the ticker ‘TRIP.’

TripAdvisor, which operates Web sites in 29 countries including China, offers travel advice, recommendations, and planning services. It is the most popular travel-related site on the Web, according to independent research. Expedia’s remaining sites, including expedia.com and hotels.com, provide airline, hotel, and other travel-related booking services for a fee. Barry Diller is Chairman of the Board and Senior Executive of EXPE and holds 61% of the company’s voting rights, which include a proxy to vote Liberty Interactive Inc.’s (NASDAQ: LINTA) 29% stake. Diller and Liberty are expected to maintain their stakes in both companies, and as a result TripAdvisor will have similar “controlled company” exemptions related to an independent Board of Directors.

The separation appears to be an effort to unlock shareholder value. The fast-growth, cash-flow-generating TripAdvisor could be positioned to generate a much higher valuation multiple as a standalone business. The slower-growth, more capital-intensive EXPE would seem poised for a modestly lower multiple following the separation. To some degree, EXPE has already benefited from investor anticipation of the benefits of the separation. The stock is up more than 25% since the April announcement, compared with a 6% decline for the S&P 500 over the same period.

Despite the seemingly sensible rationale for the separation, investors may wish to proceed cautiously when exploring the spin-off’s potential, given some clear drawbacks. The two businesses are synergistic, with TripAdvisor feeding traffic to EXPE. A visitor to TRIP can explore destinations and then book the vacation on EXPE. The much smaller TRIP will be saddled with much higher G&A costs as a standalone business, which will pull down operating margins post separation, while EXPE will have higher sales and marketing costs, both because it will compensate the independent TripAdvisor for drawing traffic to its site and because of its need to find new ways to reach web audiences.

Of particular concern to EXPE may be the recent entry of Google Inc. (NASDAQ: GOOG) into the travel marketplace with the August 2011 launch of Google Flight Search service. The Internet behemoth could also eventually seek to challenge TripAdvisor by aggregating hotel and restaurant reviews. The threat appears greater following the recent purchase by Google of Zagat, the customer-driven restaurant review guide. Alternatively, Google could consider purchasing TRIP.

On a sum-of-the-parts valuation, one could reach a fair value estimate of $60 per share for the post-separation, post-reverse-split companies. That estimate offers less than 10% upside from the price of the current pre-reverse-split shares ($28.37). Given the competitive threats and higher costs associated with the split, the stock is not recommended for purchase. However, one might note that tourism spending is expected to rise at a considerable pace over the next five years, and EXPE and TRIP could be prime beneficiaries of increased leisure travel. For investors who believe that Expedia and TripAdvisor have built strong customer loyalty and can successfully push back against the oncoming competitive threats, the stock could be considered for purchase. But ultimately, for a longer-term investor, higher administrative costs in the near term resulting from the separation into two publicly traded companies and slower growth over the next several years due to the maturing of the online travel marketplace could result in minimal gains in the stock post spin-off.

On November 5, 2010, IDT Corporation (NYSE: IDT) announced that its Board of Directors had authorized management to explore the potential spin-off of its Genie Energy division via a tax-free distribution to shareholders. Genie Energy will comprise the company’s energy services company (‘ESCO’), which resells electricity and natural gas to residential and small business customers primarily in New York, Pennsylvania, and New Jersey, as well as interests in shale oil initiatives in the state of Colorado and in Israel. Following the spin-off, planned for 4Q 2011, the stock is expected to trade on the NYSE under the ticker ‘GNE’. The distribution has been set at one share of GNE for every share held of IDT. The transaction still requires SEC approval and an affirmative IRS ruling. Following the spin-off, IDT will continue to provide telecommunications services, including prepaid and rechargeable calling cards, and voice over Internet protocol (VoIP), as well as consumer local and long distance offerings and wholesale international traffic carriage. In addition, IDT operates social-networking site Zedge.com and video software platform Fabrix TV and holds patents related to its VoIP services.

Reasons for the spin-off include investor confusion over the various pieces of IDT with their divergent growth prospects and internal competition for capital that have existed under IDT’s current structure. As a stand-alone, Genie Energy will seek to develop its shale oil initiatives, including an Israeli license to explore a shale oil play that covers approximately 238 square kilometers, estimated to hold approximately 40 billion barrels of oil equivalent. Pilot test operations to provide a basis for determining the economic viability of the shale could begin as early as calendar year 2012. For its part, IDT Corporation would promote its mobile content platform Zedge.com and its video software platform Fabrix TV as it continues to operate its core telecommunications services business, which includes prepaid and rechargeable calling cards and local and long distance consumer services in the US. In mid-2011, IDT cancelled the planned spin-off of its Voice over Internet Protocol (VoIP) patents into a separate, publicly traded entity because of concerns that placing the enforcement of the patents with an independent entity not under the company’s control would increase risks. For now the patents will remain as part of the parent.

On a sum-of-the-parts basis, one may arrive at a fair value estimate of $25 per share for IDT pre-spin when considering the cash flow generation of IDT telecom’s phone card and wholesale carrier services, as well as Genie Energy’s retail electricity and natural gas services. The long-term outlook for global phone card sales may raise concerns about the dividend attached to the parent. On the other hand, the optionality of potential future cash flow from the Israeli or Colorado shale oil plays provides significant upside to the value of Genie Energy. As a result, one might consider a closer examination of GNE following the spin-off rather than a pre-separation purchase. Such a purchase is likely most appropriate for a high-risk, high-reward style of investor because a future Genie partner would seem necessary for future development in Israel; otherwise, the company would still be required to raise substantial capital for the long-term funding commitment.

On December 8, 2010, NTELOS Holdings Corp. (NASDAQ: NTLS), a Virginia-based regional communications services provider, announced that its Board of Directors had approved the tax-free spin-off of its wireline business from its wireless business, to take place during the second half of 2011. The transaction is subject to IRS and SEC approval, as well as confirmation from state regulatory bodies and the Federal Communications Commission (FCC). The spin-off company, to be named NTELOS Wireline One, will operate the company’s land-line businesses as a rural exchange carrier, offering communications services to residential and small business customers in select cities in Virginia and, as a competitive wireline operator, providing large business customers with high-capacity Internet protocol and data services, primarily in Virginia and West Virginia. NTELOS Wireline One’s operations are supported by a 5,800-route-mile fiber optic network. The spin-off is expected to trade on the NASDAQ under a yet-to-be-determined ticker symbol.

Following the separation, NTELOS Holdings will continue providing wireless digital voice and data service to approximately 429,000 subscribers, primarily in Virginia and West Virginia, as well as operating a wholesale business that provides Sprint Nextel (NYSE: S) service in the western Virginia and West Virginia area for Sprint Nextel customers.

The separation will offer shareholders two investment alternatives: a wireline carrier characterized by slow growth, relatively stable cash flow, and a healthy dividend or a faster-growth wireless provider. Following the spin-off, NTELOS could be an attractive candidate for takeout by larger wireless companies, including Sprint Nextel, which may seek to expand their US networks. However, based on a sum-of-the-parts analysis of future projected cash flows and dividends from Wireline One and growth prospects for NTELOS, and considering historical and comparable earnings and cash flow multiples for both entities, one may reach a fair value estimate of $20 per share pre-spin for NTLS. As a result, the stock appears fairly valued at present and is not recommended for purchase prior to the separation.

A number of challenges lie ahead for Wireline One. US consumers continue to transition to wireless-only for voice services, and total US wireline access lines have been declining every year for more than a decade. While the transition in rural communities has been slower, one cannot ignore this dynamic when considering an investment in a landline provider. Notably a younger generation of consumers that grew up with wireless service may opt out of landline usage when they become first-time home buyers. More than half of all adults aged 25 to 29 years lived in wireless-only households, based on a 2010 survey by the Centers for Disease Control (CDC). By comparison, only about 5% of the population over the age of 65 lied in wireless-only households. As this younger generation heads a larger percentage of households the trend away from wireline service may grow considerably. Offsetting the decline in access lines, wireline providers have generated stronger revenue per customer by offering additional services, including Internet access and multi-network video offerings (in an effort to compete with cable television providers). Wireline carriers, including Wireline One, have also attempted to offset declines in their established voice customer bases by making acquisitions to expand geographic reach and then adding services for the new customers purchased. This strategy is not without risks, such as overpaying for customers, overspending to increase new services, failing to judge success rates for signing up customers for expanded or bundled services, and failing to integrate new systems into entrenched IT platforms.

For a value-seeking investor interested in a healthy dividend, with the potential added benefit of a premium-paying buyer for the wireless assets, NTLS could considered at a price below $20. For others, the future risks to even anemic growth in the wireline business may be enough to warrant looking elsewhere for investment opportunities.

BOBE operates in two distinct businesses: the company owns and operates the Bob Evans Farm chain of family dining restaurants, and it also operates BEF Foods, the company’s food products division, which sells a variety of fresh and frozen sausage products, side dishes, and frozen meals. The company also owns 482 properties on which the company’s restaurants are located.

The combination of two businesses with minimal synergies, whose peers trade at varying multiples, is likely resulting in a conglomerate discount for the food products business. Additionally, the value of BOBE’s significant real estate does not appear to be fully valued in the current share price.

If management were to enter into a sale-leaseback transaction and separate the food products business, significant value could be unlocked, in our view. Considering peer group multiples, asset values, cash flow generation, and the implementation of a sale-leaseback on the underlying real estate, we value the restaurant operations at $22 per share, the food products business at $25 per share, and the real estate at $27 per share. Accounting for current net debt of $14 per share, a sum-of-the-parts valuation of $60 is derived.

A spin-off of the food products business, without a real estate transaction, would result in an increased valuation multiple for BEF Foods. However, given the segment’s 30% contribution to earnings, the higher valuation multiple would only unlock modest value, in our opinion.

Activist investors have targeted BOBE urging management to separate the two businesses, enter into a sale-leaseback on the company’s significant real estate portfolio, and enact a sizable share repurchase effort. Thus far management has been resistant to change; however, recent corporate restructuring initiatives and the sale of an unprofitable restaurant chain may be indicative of BOBE’s management succumbing to pressure and may lead to the implementation of one of these suggestions.

On December 4, 2013, Westfield Group, announced its intention to separate its Australia and New Zealand real estate assets, and subsequently merge them with Westfield Retail Trust, through distribution of shares in a newly created company named Scentre Group. The remaining company will retain the US and European properties and will be renamed Westfield Corporation.

According to the proposal, WDC shareholders will receive 1,246 shares of Scentre Group and 1,000 shares of Westfield Corporation for every 1,000 shares they own. After the demerger, they will own 100% of Westfield Corporation and 48.6% of Scentre Group. WRT shareholders will receive 918 Scentre Group shares and AUD 285 for every 1,000 shares they own, and will control 51.4% of Scentre Group. The cash component of AUD 0.285 per share is based on an AUD 850 million capital return which will be implemented through a share buyback of 8.2% of shares outstanding at a price of AUD 3.47 per share—a 16% premium to December 3rd’s closing price.

After the spin-off, Westfield Corporation will be comprised of 40 malls in the US (38) and UK (2). The portfolio has gross leasable area of approximately 49.5 million square feet and USD 17 billion in annual retail sales. Westfield Corporation’s assets stand at USD 17.4 billion, and its operating platform’s assets under management at USD 26.6 billion. The corporation sees significant opportunities for growth in all geographical areas it operates. Its development pipeline of USD 6 billion will increase its asset base by a third in the next few years. Both Frank Lowy and his sons Steven and Peter will continue holding the same positions as in WDC, that of Chairman and Co-CEOs, respectively. Westfield Corporation’s strong profitability, high leverage—by Australian levels—and new projects are expected to lead to a low double digit ROE. It will target a high dividend payout ratio, nevertheless taking into account its funding needs. The first dividend, for 2014, will be USD 0.246, or approximately AUD 0.262, per share. Following the spin-off, the company could be valued between AUD 6.4 and AUD 7.8 per unit. Given that the higher end of the valuation range is contingent on Westfield Corporation being valued at par with its US peers, a foreign listing, which the company is considering, would likely be required.

Scentre Group will merge Westfield Group’s and Westfield Retail Trust’s stakes in the same assets. Moreover, it will also own WDC’s operating platform managing Australian properties and developments. Its portfolio will comprise AUD 29.3 billion in assets and 47 malls. Total AUM, including Scentre Group’s own properties, will be AUD 38.6 billion. As the Lowy family will be one of the largest shareholders of the combined entity—the WDC’s distribution will give them a stake of 4.2%—Frank Lowy will assume the post of the Chairman of Scentre Group. The Australian retail market does not offer significant opportunities for growth, as valuations are very high and the Australian market small. The company has a project pipeline of AUD 2.6 billion, and aims to pay 90-100% of its FFO as dividends. Its first distribution, for 2014, will equal AUD 0.204 per share. Post spin-off, a fair valuation between AUD 3.3 and AUD 3.6 per unit is derived.
Westfield Group shareholders will have interests in both Westfield Corporation and Scentre Group. Based on the distribution ratios for both companies, WDC units are valued between AUD 10.5 and AUD 12.2 Approximately 65% of the sum-of-the-parts price is derived from Westfield Corporation. The mid- and high-case scenario indicate a moderate 7% and 13% upside, respectively, and even a conservative valuation provides a decent margin of safety.

Westfield Retail Trust shareholders will receive a capital return of AUD 0.285 per share, representing approximately 9% of the stock’s current price. The remainder of their value will be their 51.4% interest in Scentre Group, which is expected to be a high yielding and slow growth company. Based on the expected dividend Scentre Group will distribute, and adjusting for the number of shares distributed for each WRT share, an investment in WRT at the current level will result in a dividend yield of 5.8%—excluding the capital return. The resulting SOTP valuation range is between AUD 3.3 and AUD 3.5. On the one hand, the fact that even a conservative valuation of AUD 3.3 is above the current unit price, the prospect for an immediate 9% return and a 5.8% 2014 dividend yield combined with an expected capital preservation, would make Westfield Retail Trust a worthwhile short-term event-driven opportunity. On the other hand, one should not ignore the expertise and actions of the Lowy family, who through their WRT divestment have made it clear that they do not wish to have significant exposure to Australian real estate.

Fortune Brands Inc. (NYSE: FO) intends to spin off its home and security business to shareholders in 2H 2011. The spin-off, to be named Fortune Brands Home & Security, is a leader in a variety of branded consumer products, including: faucets, cabinets, entry-doors, windows, and padlocks as well as related security and storage products. Well-known brand names include Moen faucets and Master Lock padlocks. The business has been negatively affected by a weak housing market and a shrinking number of distribution points. In response Home & Security has reduced manufacturing capacity and cut staff. Nevertheless, revenue and margins are closely correlated with the US housing market, and therefore profit recovery is likely tied to improving new home sales.

The spin-off is to be effected as a tax-free pro rata distribution of shares to shareholders. Home & Security is expected to trade on the NYSE under the symbol ‘FBHS.’ Shareholders of record will receive one share of FBHS for every share owned of FO. A distribution date has not been set. The SEC still must declare effective the FBHS Registration Statement to conclude the regulatory review. Management also awaits an IRS private letter ruling on the tax-free status of the distribution. A $500 million special dividend is expected to be paid by Home & Security to the parent as part of the separation agreement.

The spin-off is the likely final step as Fortune Brands disentangles its myriad pieces. In May 2011, management announced the sale of its golf business, Acushnet, to a group led by Fila Korea Ltd. and Korea’s Mirae Asset Private Equity, for $1.225 billion cash (net proceeds after taxes for Fortune will total about $1.1 billion). Acushnet includes brand names such as Titleist and FootJoy.

Following the completion of the golf business sale and the home and security spin-off, the remaining entity, to be renamed Beam Inc., will be a pure-play spirits company with a leadership position in bourbon (Jim Beam) as well as participation in global cognac (Courvoisier), tequila (Sauza), and other liquor markets.

The global wine and spirits industry is undergoing a period of significant consolidation, which may leave Beam as either a potential acquisition target or an acquirer. The spin-off of the home and security business and sale of the golf segment make Beam a more attractive takeout candidate. Nevertheless, even assuming a reasonable acquisition multiple for Beam, plugging in the cash proceeds for the sale of Acushnet, and considering both historical and current comparable multiples for the home and security business, one can reach a fair value estimate of no more than $69 per share for FO, pre-spin-off. Given the less than 10% upside to the current stock price as of early June 2011, FO is not recommended for purchase ahead of the separation. However, for investors with a long-term time horizon, shares of FO may be worthy of consideration. Upside to the $69 per share fair value estimate may be possible based on a faster or stronger recovery in the housing market, a potential sale of the spirits business at a higher multiple if it is a strong fit for one of the bigger global players, or Beam’s ability to make acquisitions, gain global share, and build out margins at a faster rate.