Abstract
It is widely believed that unbundling will immediately add value to shareholders. This paper investigates the basis for this belief. It is contended that the benefits of unbundling are not based on the US experience of corporate refocussing. In the US, many conglomerates experienced a “diversification penalty”. When US conglomerates divested their businesses this “diversification penalty” was eliminated, to the immediate benefit of shareholders. This paper investigates whether a “diversification penalty” is present in South Africa. The results appear to indicate no such penalty. The paper also investigates the relationship between insider ownership and corporate diversification. The benefits from unbundling are not simply based on the elimination of diversification penalties, but on managements focus on core business and competencies.