Arcane Spinoff Rule May Lift M&A Targets Like Yum China, Arconic

Deal stocks including Yum China Holdings Inc., Arconic Inc. and Conagra Brands Inc. may grow more valuable as autumn approaches, thanks to an esoteric tax rule governing recent spinoffs.

Acquisitions made within two years of a supposedly tax-free spinoff could retroactively morph the separation into a taxable event -- and force the acquirer to pick up the tab. To avoid this risk, most mergers and acquisitions involving recent spinoffs are conducted after their two-year anniversaries. Over the past decade, a majority of companies waited two years from their respective spinoffs to make deals, according to data compiled by Bloomberg.