American Express Co. said that it will spin-off its American Express Financial Advisors unit to shareholders to focus on its credit cards, charge cards and travel services businesses.
Shareholders would receive 100 percent of the common shares of the company, which would be renamed American Express Financial Corp. AmEx said that it expects to complete the transaction in the third quarter.
"This spin-off will create two distinct businesses and allow them to capitalize on their respective growth opportunities," said Kenneth I. Chenault, chairman and chief executive officer of American Express. "As an independent company, AEFA would not have to compete for capital or management resources with other American Express businesses, and therefore would be able to react more quickly to market opportunities for new products, partnerships and expansion."
AEFA, which provides financial planning and advice services, asset management, insurance, and annuities, generated revenues of approximately $7 billion and net income of approximately $700 million in 2004. AEFA has a network of more than 12,000 advisors that serve more than 2.5 million clients, according to the company.
After the spin-off, American Express will consist of its charge and credit card business, a network that processes more than $400 billion in transaction volume, global travel and travelers check businesses, and an international bank serving affluent consumers and financial institutions -- businesses that it says delivered approximately $22 billion of revenues and net income of $2.7 billion in 2004.
The two companies will enter into exclusive marketing affiliations that will allow AEFA to continue to use the American Express name for a transition period following completion of the spin-off. Both companies will also continue an exclusive marketing affiliation "for a transitional period" for certain co-branded programs, including working arrangements with partners such as Delta Air Lines and Costco, and AEFA's Gold and Platinum Financial Services offerings.
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