AT&T, USX to Shed Tracking Stocks

In a new trend, large companies are starting to back away from their tracking stocks by setting them up as independent public companies via the spin-off or split-off format. AT&T Corp.’s previously announced plan to disengage from cable TV programming unit Liberty Media Group moved forward when the Internal Revenue Service (IRS) delivered a favorable tax ruling on a spin-off. Also as part of its far-flung restructuring, AT&T announced that it will dispose of the remainder of its holdings in AT&T Wireless Group through a split-off based on an exchange of shares. Meanwhile, USX Corp. divulged plans to abandon its longstanding tracking stock structure and turn its steel and oil companies into separate publicly traded firms. There are no special tax issues involved in spinning off tracking stocks. However, the IRS blessing to the tax-free character of the Liberty spin-off was important because that firm came under AT&T’s control through the acquisition of Tele-Communications Inc. in March 1999. In most cases, IRS rules bar tax-free treatment for spin-offs of businesses owned for less than two years. AT&T plans to complete the Liberty disposition by the summer by spinning off its remaining interest to shareholders. AT&T will shed its remaining interest in AT&T Wireless by swapping 1.176 of the wireless unit for one share of AT&T common. The swap carries a premium of 7%. USX’s spin-off scheme is to turn USX-Marathon Group into Marathon Oil Co. and USX-U.S. Steel Group into United States Steel Corp., a venerable name that was at one time the acknowledged bellwether of the American steel industry. When completed, the division will reverse a 1980s diversification move in which U.S. Steel sought to cushion itself against cyclical fluctuations in steel by owning a more stable oil business.