Amex to Spin Off Financial Advisory Unit

Financial services giant American Express Co. (AXP) said Tuesday it plans to spin off its financial advisory business to its shareholders and focus on its charge and credit card, payments processing and travel businesses.

The company said its shareholders would get all of the shares of the new company which would be known as American Express Financial Corp (search). The spinoff is expected to be completed in the third quarter of this year, the company said.

The financial advisory business provides financial planning and advice, asset management, insurance, annuities and related businesses through a network of more than 12,500 advisors. It generated revenues of about $7 billion and earned about $700 million in 2004.

"This spin-off will create two distinct businesses and allow them to capitalize on their respective growth opportunities," Kenneth I. Chenault (search), chairman and chief executive officer of American Express, said in a statement.

He said the new company would have greater latitude as an independent company to compete for capital or management resources, and react more quickly to business opportunities.

After the spin-off, American Express will consist of a charge and credit card business and a network that processes more than $400 billion in transactions from merchants throughout the world. It will also operate global travel and Travelers Cheque businesses and an international bank serving wealthy consumers and financial institutions.

Those businesses delivered approximately $22 billion of revenues and net income of $2.7 billion in 2004.

The two companies will be independent, have separate public ownership, boards of directors and management.

The spinoff business will continue to be led by James Cracchiolo as chairman and chief executive.