GE Is Exploring Spinoffs, IPOs, Hybrid Deals

As General Electric (GE) is looking into ways to turn the ailing company around, it’s considering a spinoff of one of its divisions as well as hybrid deals.

Hybrid deals would result in GE shareholders having stakes in several companies and a lower tax bill for the company. GE could spin off a division for a public offering or it could combine it with a smaller public company, according to The Wall Street Journal, citing people familiar with the matter.

For example, GE is unlikely to sell GE Transportation, which makes diesel freight locomotives. It’s been looking into different options for the division for several months but has not found a buyer. GE could launch an initial public offering or spin off the division, which is valued at about $7 billion. It could combine with another company, leaving shareholders with a stake in the new entity. (See also: General Electric, Baker Hughes Eye Deal)

Essentially, GE now doesn’t want to divide its company into smaller businesses. It wants to make bigger businesses that are more competitive, the Journal’s sources said. (See also: The Rise and Fall of GE.)

GE’s stock has plunged by more than half over the past year and about 27% so far this year as it grapples with massive cash shortfalls and a mountain of debt. Now, it’s accounting practices and connections with subprime mortgages are under investigation by the Securities and Exchange Commission (SEC) and the Justice Department.

Deutsche Bank has said it expects the company will be dropped from the Dow Jones Industrial Average (DJIA) blue-chip index. And, in a note to clients Monday, JPMorgan analysts said the stock is the “most expensive” in the sector. (See also: GE ‘Most Expensive Stock’ in Industry Sector: JPM.)

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