Examples
Verizon wished to sell its access lines to Fairpoint. Rather than simply selling these assets alone to Fairpoint, however, Verizon created a subsidiary (to which it sold these assets) and distributed the shares of this new subsidiary to Verizon's shareholders. They then completed a Reverse Morris Trust with Fairpoint, where the original Verizon shareholders had a majority ownership of the newly merged company and the Fairpoint management ran the new company. Verizon was able to divest their access lines in a tax free manner as they continued to focus on higher growth wireless business.
Procter & Gamble Co. was planning to sell its Pringles line of snacks to Diamond Foods in a leveraged, reverse Morris Trust split-off. The Pringles business would be transferred to a separate subsidiary which would assume approximately $850 million of debt. However, the two companies were unable to finalize the deal, and in February 2012 Procter & Gamble found another buyer in the Kellogg Company.
Procter & Gamble used a similar transaction structure when it sold Folgers coffee to J.M. Smucker in 2008.
Read more about this topic: Reverse Morris Trust
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