A Reverse Morris Trust is used when a parent company has a subsidiary (sub-company) that it wants to sell in a tax-efficient manner.
Under Internal Revenue Code section 368(a)(1)(A), this transaction could be largely tax-free if the former subsidiary is considered the "buyer" of the target company.
[8] On May 17, 2021 AT&T announced that it was spinning off its content subsidiary WarnerMedia and merging it with Discovery, Inc. to form a new company, Warner Bros.
The deal, which closed in April 2022, was structured as a Reverse Morris Trust; at the time the deal was completed, AT&T's shareholders held a 71% stake in the combined company and appointed seven board members, while Discovery, Inc. held the remaining 29% and appointed six board members.
[9][10] Procter & Gamble was planning to sell its Pringles line of snacks to Diamond Foods in a leveraged, reverse Morris Trust split-off.
The two companies were unable to finalize the deal and, in February 2012, Procter & Gamble found another buyer in Kellogg's.