Sunday, October 14, 2012

Textron Jumps on Report About Spin-Off

Textron (TXT) rose 7% in early trading after Reuters reported that the company is considering spinning off parts of its business as part of a strategic review. Textron owns Cessna aircraft and Bell helicopters, among other industrial and defense businesses.

The company has received attention from activist investor Ralph Whitworth, but it’s unclear whether Whitworth’s Relational Investors has taken a large stake and started advocating for changes, according to Reuters.

Vertical Partners analyst Jeff Sprague notes that investors need to take the report with a grain of salt, but the idea of a break-up is plausible.

“We would expect that TXT (like any company) would routinely do strategic reviews, but we don�t see TXT as a near term break-up candidate as a relatively new CEO, Scott Donnelly, focuses on operationally improving its core businesses. The report does say that nothing is imminent and TXT has not hired bankers. However, in many respects TXT is the most obvious remaining candidate in our group for some type of break-up, eventually, given that it is more of a holding company with distinct unrelated businesses with their own brands and channel identities.”

Textron stock is down 11% in the past year.

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