The Impending Spinoff of a Spinoff: Covidien plc (COV), Pfizer Inc. (PFE), Abbott Laboratories (ABT)

Another key difference between the three spinoffs is size. AbbVie began its new life anticipating $18 billion in sales and with a market cap of more than $55 billion. Zoetis launched with a market cap around $13 billion and should see sales this year well over $4 billion.

Mallinckrodt will be smaller than either of the earlier spinoffs. The company will have around $2 billion in annual sales.  I expect the new company’s market cap to be no greater than $5 billion.

Opportunity knocks?
Zoetis jumped more than 20% higher than its IPO price on the first day of trading. Shares have slipped some but are still trading more than 18% higher. Don’t expect that type of frenzy with Mallinckrodt. For one thing, there won’t be an IPO since the shares will be distributed to current Covidien shareholders.

Abbott’s spinoff of AbbVie might be more comparable to what could happen with Covidien and Mallinckrodt. Shares of both Abbott and AbbVie are up around 6% since the companies separated.  Of course, part of those gains can be attributed to the overall market’s rise since the beginning of the year.

My view is that this upcoming spinoff will benefit Covidien shareholders. I’m not sure how well Mallinckrodt shares will perform in the near term. Over the long run, though, the new company could do well — and perhaps be a target for another larger company down the road. As was the case with Abbott/AbbVie and Pfizer/Zoetis, this impending spinoff of a spinoff should be one to watch.

The article The Impending Spinoff of a Spinoff originally appeared on Fool.com and is written by Keith Speights.

Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Covidien.

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