US conglomerates are increasingly breaking up into focused, independent companies as spin-offs gain traction as a strategy to unlock shareholder value, sharpen management focus, and respond to market demands.
Corteva said on Wednesday that it plans to spin off its seed business into a separate publicly traded company, joining a wave of major firms pursuing similar strategies.
The agrichemicals company, which was itself formed after DowDuPont split into three entities in 2019, expects the spin-off to be completed in the second half of 2026, allowing investors to assess the seed business independently while management focuses on growth opportunities specific to agriculture.
Spin-offs become a strategic tool for large corporations
The Corteva move adds to a growing list of high-profile corporate separations, including Kraft Heinz, Warner Bros. Discovery, and DuPont.
Last November, Comcast announced plans to separate its cable network channels, creating a new publicly traded company encompassing NBCUniversal’s cable television networks and complementary digital assets.
Similarly, Kraft Heinz recently declared it will divide into two publicly traded companies, nearly a decade after the $45 billion merger orchestrated by Warren Buffett’s Berkshire Hathaway and 3G Capital.
Industrial giants are following suit as well.
Earlier this year, Honeywell announced plans to split into three independent companies, separating its automation and aerospace businesses and combining this with the planned spin-off of its advanced materials unit.
“The formation of three independent, industry-leading companies builds on the powerful foundation we have created, positioning each to pursue tailored growth strategies and unlock significant value for shareholders and customers,” Honeywell Chairman and CEO Vimal Kapur said at the time.
General Electric has also pursued a multi-year breakup strategy.
In November 2021, GE announced it would split into three independent public companies covering aviation, healthcare, and energy.
By April 2024, the company had completed the spin-off of its energy business, GE Vernova, while refocusing its operations on aviation and healthcare.
Source: Bloomberg
Investor focus drives the rise of spin-offs
Spin-offs have become increasingly popular among US corporations because they allow management to concentrate on a single business while providing investors with greater clarity on strategic priorities.
Between 2021 and 2023, there were 677 spin-offs of public companies, including household names such as Kellogg and General Electric.
Investors are attracted to spin-offs for their potential to reduce risk, improve capital allocation, and increase market transparency.
The trend reflects a shift away from the era of massive conglomerates.
Iconic CEOs like Jack Welch of GE built sprawling corporate empires on the belief that scale equated to power.
Yet these giants often struggled to compete with smaller, focused competitors.
Spin-offs offer a path to create nimble, specialized companies better equipped to innovate and respond to market demands.
Performance of spun-off units
Evidence suggests spin-offs can outperform the market.
Since its spin-off last April, GE Vernova has delivered a 350% return, while GE Healthcare’s stock has seen a more modest increase of just over 30% since its 2022 listing.
GE’s parent company stock rose 61% in the past year.
Studies in the Journal of Financial Economics indicate that both parents and spin-offs tend to outperform the market in the three years following separation.
The performance may partly result from acquisition interest, as spin-offs often attract potential buyers, temporarily boosting stock prices.
However, research by the Boyar Value Group found that over 2010-2020, spin-offs underperformed the S&P 500 by about 2.7%.
Similarly, a 2022 Harvard Business Review study of 350 spin-offs found that about half failed to create new shareholder value, while 25% lost value.
Yet the top-performing quartile increased market capitalization by roughly 75% within two years.
Key success factors for spin-offs
Experts note that successful spin-offs require a favorable industry, strong operational performance relative to competitors, and a capable leadership team.
Companies that operate in high-growth, profitable sectors and retain top talent tend to attract and retain customers while innovating to maintain a competitive advantage.
Investor appeal is often linked to clarity.
Spin-offs allow management teams to concentrate on a single mission, reducing conflicts over capital allocation and strategic priorities.
The result can be faster innovation, stronger customer retention, and improved market competitiveness.
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