Reference no: EM133227650

You are advising a media and entertainment company that has the following capital and credit structure characteristics:

A credit rating of BBB-. It has recently been placed on credit-watch negative by S&P

A competitive environment in which many of its peers maintain a rating of BBB+ or above

No excess cash on its balance sheet

You advise the company that there appears to be hidden value in its web-based businesses which are under-appreciated and undervalued by the market. Providing shareholders with direct exposure to these businesses will increase transparency and highlight their hidden value. The web-based businesses provide for cross-selling opportunities with its media and entertainment business but otherwise operate separately. Some of the intangible relationship benefits between the core business and the web-based businesses can be captured through a contractual arrangement, but not all.

Given the above considerations, describe the advantages and disadvantages of a divestiture of 100% of its web-based businesses, an equity carve-out of part of the business, a spin-off/demerger of part of the business and a split-off of the business. Indicate a preferred restructuring option and a recommended percentage which they should sell down.