If I were running General Electric, I would have chosen to spin off GE Capital to the existing General Electric shareholders as a tax-free spinoff rather than sell $150+ billion of the remaining GE Capital to outside buyers (principally Wells Fargo and Blackstone).
Spinoffs are preferable to asset sales because of tax efficiency. General Electric is going to record $16 billion in charges in connection to yesterday’s announced restructuring. Selling appreciated assets to Blackstone and Wells Fargo costs money, with estimates ranging from $4 billion to $6 billion in tax payments alone.
It is also choosing to repatriate $36 billion in cash that is sitting in 175 countries around the world. This is a move GE hasn’t done in a big way since the Bush administration’s tax repatriation holiday in 2004, and the 2015 repatriation will cost the company $6 billion in taxes. Considering that the repatriation rate for large … Read the rest of this article!