Double Reverse Morris Trust

Transaction Overview

The double reverse Morris Trust structure is relevant for several scenarios:
- Two public companies with divisions, which have good strategic fit, but for which a sale from one to another would be tax inefficient or otherwise untenable
- Two public companies in a 50:50 joint venture seeking a tax-efficient exit for both parties and a fully distributed public market valuation
- A public company with a non-core subsidiary which does not have the scale to be a separate public company but when combined with a division of another company in the industry would be more formidable

Transaction Steps	Final Structure

Advantages

Disadvantages

Expands universe of potential Morris Trust partners
Spun entity gains size and scale through combination
Significant monetization possible through debt/debt swaps
Shareholders get benefits of synergies of merger
Shareholders get benefits of a viable public company with significant size and scale
Can execute as a split-off to ameliorate any issues created by size of subsidiary spun off relative to seller

Shareholder overlap between two entities must exist at closing to ensure tax-free treatment
Monetization restricted by market capacity and Section 355 limitations
Need to equalize values of subsidiaries contributed to NewCo