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Cramer: Most lucrative way to unlock stock value

Jim Cramer has always said that sometimes the easiest way for a company to create value is to split itself up into understandable parts for investors.

The "Mad Money" host has been a huge fan of the school of thought that breaking up is easy to do. The question is how they choose to do it. Management in some companies choose to shed their poorly performing divisions, while others choose to unlock value by splitting up into a multi-division company.

On Tuesday, Cramer heard terrific news of two top companies choosing to split up to bring out more value—Baxter International and RR Donnelley. Cramer has been pushing for Baxter to split up for ages, and even dedicated a chapter to it in his book "Get Rich Carefully." He pushed for it to broken up into a slower growing, methodical device company, and a fast ramping biosciences company.

Sure enough, the Baxter board agreed to provide investors with a special dividend called Baxalta which was made up of top blood franchise drugs. Investors received Baxalta on July 1, and Cramer immediately praised it as a way to get exposure for the company.





Baxter International Inc.
Brent Lewin | Bloomberg | Getty Images
Baxter International Inc.
"The company before this new configuration did seem like a confusing mosaic" -Jim Cramer

Clearly someone was listening! On Tuesday morning Shire, an aggressive Ireland domiciled pharmaceutical company, launched a hostile takeover of Baxalta. And of course, the $45.23-per-share bid for Baxalta immediately prompted the stock to skyrocket as investors drooled with dollar signs. Once the deal closes, investors would be up 18 percent from when the spinoff occurred.

"That said, it makes a ton of sense for Shire to pursue it, even at a higher price, because Shire has a very favorable overseas tax status and can immediately boost its earnings if the deal does close," the "Mad Money" host said. (Tweet This)

RR Donnelley also knocked off Cramer's socks when it announced its decision to split itself into three companies. This made a ton of sense to Cramer, as he thought that they all did not belong together under one roof.

The publishing and retail services company announced it would be a financial communications services company, a customized, multi-channel communications management company and a printing services business.

"The company before this new configuration did seem like a confusing mosaic," Cramer said.

The new structure will allow RR Donnelley to lock down the financial communication aspect of public companies, while cashing in the popularity of bricks-and-mortar retailers to expand in ecommerce.

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However, the most exciting aspect of the business for Cramer is its print services business. He considers it to be a fantastic opportunity for RR Donnelley to make strategic acquisitions and consolidate the industry.

"I salute both management teams for recognizing the need to create easy to understand structures that immediately unlock value," Cramer added.

Ultimately, Cramer wants other management teams to realize that breaking up doesn't always have to be hard to do. It can be both easy and lucrative in the long run.

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