Exela Announces Plans to Spinoff Its BPA Business to Maximize Shareholder Value
Exela Technologies has announced plans to spin off its wholly-owned subsidiary, Exela Technologies BPA, to enhance shareholder value. The proposed spin-off will allow Exela stockholders to receive a pro-rata share of a new holding company that owns the business process automation (BPA) business while retaining their shares in Exela, which includes over 70% ownership in XBP Europe Holdings and the North American onsite services business.
The distribution is planned for the third or fourth quarter of 2024, pending Board approval and other customary conditions. A detailed registration statement will be provided before the distribution date. Exela is also evaluating if the spin-off qualifies as tax-free under U.S. federal income tax laws.
Further updates will be available through public filings with the SEC. Legal counsel for the spin-off is Loeb & Loeb LLP.
- Potential spin-off aims to maximize shareholder value.
- Shareholders to receive pro-rata shares of the new holding company owning the BPA business.
- Stockholders will retain ownership in Exela, including over 70% in XBP Europe Holdings.
- No action or payment required by shareholders for the spin-off.
- Uncertainty regarding the completion of the spin-off transaction.
- Pending evaluation if the spin-off qualifies as tax-free under U.S. federal income tax laws.
- Potential tax implications for shareholders if the spin-off is not tax-free.
Insights
Exela Technologies' announcement about the potential spin-off of its BPA Business is a significant development. Spin-offs are corporate actions where a company creates a new independent company by selling or distributing new shares of its existing business. The primary goal here seems to be maximizing shareholder value. By separating the BPA Business, Exela aims to unlock value that might be hidden within the combined entity. This move can lead to a more focused operational strategy for each resulting company.
From a financial perspective, such spin-offs often lead to a revaluation of the parent company and the spun-off entity. Investors should note that the separation of BPA could lead to more transparent financial performance for both entities. Historically, companies that spin off subsidiaries often see a rise in their market value post-announcement, as the market begins to value the businesses separately. However, investors should be cautious as the spin-off process involves certain risks, such as the costs associated and potential operational disruptions.
Furthermore, the tax implications mentioned under Section 355(a) of the Internal Revenue Code could mean that, if done correctly, the distribution might be tax-free for current shareholders, which is a positive aspect. However, shareholders should consult with tax advisors to understand the specific impacts on their individual situations.
The announcement to spin off the BPA Business highlights Exela Technologies' strategy to focus on core competencies and possibly streamline operations. Spin-offs can potentially offer more specialized and efficient business operations. For investors, it’s essential to understand that the BPA Business, now being separated, might have a different growth trajectory compared to Exela's remaining businesses. This means the BPA Business could attract a different set of investors who are specifically interested in business process automation.
In the business process automation market, companies that can offer specialized and focused solutions often outperform diversified businesses. A separate BPA entity can pursue targeted growth strategies, form strategic partnerships and innovate without the constraints of a larger corporate structure. This focused approach could result in better market penetration and higher profitability for the BPA segment.
However, investors should also be aware that the success of this spin-off largely depends on the execution and management of both the parent and newly formed companies. The market’s reception of the new BPA entity will also play a important role in determining the value created through this spin-off.
The involvement of Loeb & Loeb LLP as legal counsel signifies the seriousness and complexity of the spin-off process for Exela Technologies. Legal aspects, particularly compliance with Section 355(a) of the Internal Revenue Code for tax-free status, are critical. If the spin-off does not meet the necessary requirements, shareholders could face unexpected tax liabilities, which could negatively impact the perceived benefits of the spin-off. Legal counsel's role will be to ensure that all regulatory and compliance aspects are thoroughly addressed to mitigate any potential legal or tax-related risks.
Moreover, the filing of a registration statement with the SEC will provide shareholders with detailed information about the spin-off, including the management structure and financials of the new entity. This transparency is important for investor confidence. Legal experts will play an essential role in drafting and ensuring the accuracy and completeness of these disclosures to comply with SEC regulations.
IRVING, Texas, July 01, 2024 (GLOBE NEWSWIRE) -- Exela Technologies, Inc. (“Exela” or the “Company”) (NASDAQ: XELA, XELAP), a business process automation leader, today announced that its Board of Directors (the “Board”) has authorized Exela to consider a spin-off of its wholly-owned subsidiary, Exela Technologies BPA, LLC, to Exela stockholders to maximize shareholder value.
The potential spin-off, if completed, would likely be structured so that all Exela stockholders as of a record date in the third or fourth quarter of 2024, to be determined by the Board, would (i) receive their pro-rata share of a newly formed holding company owning Exela’s business process automation business (the “BPA Business”) and (ii) continue to own Exela, as currently constituted, including its greater than
No action or payment will be required by Exela stockholders to receive shares of the BPA Business or any cash in lieu of fractional shares that would be paid in connection with the spin off. A registration statement containing details regarding the distribution of the shares of the BPA Business, the management following the spin-off, and other information regarding the spin-off will be made available to Exela stockholders prior to any distribution date. The closing of any distribution will be subject to customary conditions that will be set forth in the registration statement to be filed by the BPA Business, including final approval of the Board and effectiveness of the registration statement.
Exela is evaluating whether, for U.S. federal income tax purposes, the potential spin-off qualifies as a tax-free distribution under Section 355(a) of the Internal Revenue Code. If a potential spin off is consummated, Exela stockholders are urged to consult with their tax advisors with respect to the U.S. federal, state, and local or foreign tax consequences, as applicable, of the potential spin-off.
Loeb & Loeb LLP is serving as legal counsel to Exela on the potential spin-off.
Further details regarding the potential spin-off, once finalized, will be shared in public filings with the Securities and Exchange Commission. There can be no assurance, however, that the potential spin-off transaction will be completed in the manner described above, or at all.
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About Exela Technologies
Exela Technologies is a business process automation (BPA) leader, leveraging a global footprint and proprietary technology to provide digital transformation solutions enhancing quality, productivity, and end-user experience. With decades of experience operating mission-critical processes, Exela serves a growing roster of more than 4,000 customers throughout 50 countries, including over
Forward-Looking Statements
Certain statements included in this press release are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as "may", "should", "would", "plan", "intend", "anticipate", "believe", "estimate", "predict", "potential", "seem", "seek", "continue", "future", "will", "expect", "outlook" or other similar words, phrases or expressions. These forward-looking statements include statements regarding our industry, future events, estimated or anticipated future results and benefits, future opportunities for Exela, and other statements that are not historical facts. These statements are based on the current expectations of Exela management and are not predictions of actual performance. These statements are subject to a number of risks and uncertainties, which are and will be detailed (i) with respect to Exela, in Exela's Annual Report on Form 10-K and other securities filings, and (ii) with respect to the BPA Business, in the BPA Business's registration statement to be filed with the SEC (as may be amended from time to time). In addition, forward-looking statements provide Exela's expectations, plans or forecasts of future events and views as of the date of this communication, which are subject to uncertainty, and changes in circumstances including, without limitation, whether the spin-off will be consummated on the expected terms, or at all. These forward-looking statements should not be relied upon as representing Exela's assessments as of any date subsequent to the date of this press release and Exela does not undertake any responsibility to update these forward-looking statements.
Investor and/or Media Contacts:
Vincent Kondaveeti
E: vincent.kondaveeti@exelatech.com
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