Case Name :      LAB International Inc.

Authors :           James E. Hatch, David Jagodzinski

Source :             Ivey Publishing

Case ID :            909N11

Discipline :        Finance

Case Length :    23 pages

Solution Sample availability : YES

Plagiarism : NO (100% Original work)

LAB International (LAB) has two divisions that have vastly different strategies. The research and development division has a continuing need for funding and a high degree of risk, while the contract research division is a cash generator and is less risky. LAB is attempting to raise additional capital but believes that the shares of the company are undervalued in the market. It is contemplating a spinoff of one of the divisions to raise the funds and to make each company more of a pure play and therefore to achieve a more appropriate market valuation. Students must assess the merits of this strategy and place a value on the spinoff.