- 27 Mar, 2021
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Corporate Level Strategy at the Gap
On February 28 2019, Gap Inc announced that it would split into two companies, in effect spinning off its Old Navy Brand, which had been its most profitable division for a long time. Investors had demanded the split, and quickly rewarded it by a huge uptick in the company’s stock-price.
https://www.cnbc.com/2019/02/28/gap-will-split-into-two-publicly-traded-companies-with-old-navy-as-a-stand-alone.html
Please perform a thought experiment. Would the market similarly reward Apple in 2021 if it announced that it was spinning off its IPhone Division? Why or why not?
Also, aside from the stock market implications, is this a good strategy from a business standpoint? Remember, now the Banana Republic and Gap stores will be part of a different company, and will not be able to combine resources, such as real estate deals, distribution, contractor-relations and IT.
(FYI, after due consideration, Gap decided not to go through with the split. The company remains intact).
https://www.cnbc.com/2020/01/16/gap-shares-jump-on-announcement-it-will-not-spin-off-old-navy.html