Investors still gain even without a spinoff

Article Excerpt

We’ve long believed in the power of spinoffs to lift value for investors. Indeed, it’s why we were excited by the possibility that Archer Daniels would set up its Ethanol operations as a separate company and then hand investors shares in the new company. Now, however, the agri-giant has decided to sell that fuel business instead. We think you should remain excited about the move. We are. The fact is that either a sale or spinoff is good news for investors. That’s because global ethanol overproduction in the past few years has depressed prices for this corn-based fuel. As well, China will continue to impose high tariffs on imports of U.S. ethanol despite the new U.S.-China Phase 1 trade deal. By shrinking its exposure to ethanol through the sale of those operations, Archer Daniels is better able to focus on its more-profitable, core businesses such as ingredients for plant-based protein products. Higher earnings will also give the company more room to reward…