Time Warner announced on May 28 it would finally undo one of the worst - performing merg -ers of all-time by spinning off its AOL division. AOL was no bargain in 2000 but may be worth a look now. Voluminous academic research has concluded that corporate castoffs often outperform the market over the three years after they're cut loose. But investors must scrutinize the spin-off terms to ensure the freed unit isn't saddled with excessive debt or other liabilities. It's too soon to analyze the AOL deal, but William Mitchell, editor of newsletter Spinoff & Re-orgProfiles, likes some other deals. Potlatch spun off Clearwater Paper, its pulp mill operations, in December. The unit has no debt and won an IRS ruling to qualify for a lucrative alternative energy tax credit. If the ruling stands, Clearwater is trading for less than two times what it's likely to earn this year, he says.
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