A Tax-Free Choice

ITT announced in January that it was breaking itself into three units: industrial products, defense and information solutions, and water technology products. The biggest of these, the defense segment -- which was expected to account for 2011 revenue of $5.8 billion, or half the corporate total -- was already dragging down the price of the company's stock, as defense outlays in coming years are expected to shrivel.

With that sea anchor cut adrift, the company's stock reacted exactly as ITT had hoped. The day of its break-up was announced -- ITT's takes the form of a tax-free spin-off to existing shareholders -- shares shot up 16.5%, to $61.50. Spin-offs, because they can be accomplished without losses to tax authorities, are a favorite tool of CFOs in corporate breakups.

It was in January, too, that Motorola Inc. split itself into Motorola Mobility Holdings Inc. and Motorola Solutions Inc. Marathon Oil Corp. announced plans to spin off its refining operations into the new Marathon Petroleum Corp. And Sara Lee Corp. said it would split into two public companies, one focused on its coffee business and the other on meats. In December, Fortune Brands had spun off two of its three business lines to focus on the liquor business.

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