General Electric Company (NYSE:GE) is thinking about spinning off its finance arm and doing one or more initial public offerings for the new company or companies as part of the separation. That’s according to CEO Jeff Immelt, who spoke to a conference on Wednesday. The conference was covered by The Wall Street Journal and The Financial Times.
GE To Trim And Refocus
Immelt said the company was looking to cut down the assets in its financial services unit. As of March, the unit had approximately $402 billion in assets. General Electric Company (NYSE:GE) reportedly wants to trim that down to between $300 billion and $350 billion by the end of next year.
Talk of inflation has been swirling for some time amid all the stimulus that's been pouring into the market and the soaring debt levels in the U.S. The Federal Reserve has said that any inflation that does occur will be temporary, but one hedge fund macro trader says there are plenty of reasons not to Read More
If the company does spin off its financial services units, then it has the potential to be the fifth biggest bank in the U.S., according to Journal reporters Kate Linebaugh and Bob Sechler. Immelt said the division would focus more on commercial efforts like equipment finance or aircraft leasing. GE is a global leader in these areas of finance.
General Electric May Do Multiple IPOs
Although Immelt didn’t say specifically which parts of its financial division it might spin off, he did hint that GE Capital’s credit card operations and other consumer finance arms might be spun off. The company could do this either as a whole or by separating each division into separate companies through separate IPOs.
General Electric Company (NYSE:GE) has promised approximately $10 billion in stock repurchases this year, and Immelt indicated that if they do spin off any companies, more share buybacks could be in order. He said that cash released from an IPO would in turn be used to repurchase more shares.
By the end of 2015, GE wants to get down to between 9 billion and 9.5 billion shares.
General Electric’s Other Recent Disposals
While spinning off the finance operations would be GE’s biggest move yet, it has been busily disposing of businesses in recent years. It has sold off a number of insurance businesses and real-estate operations. It has also sold stakes in banks outside the U.S.
General Electric Company (NYSE:GE) has made it a goal to move away from the finance world in recent years. Financial services have made up approximately half of General Electric Company (NYSE:GE)’s continuing operations earnings. The company’s stock price and credit rating fell in the financial crisis amidst concerns about GE Capital.
Since then, Immelt has emphasized over and over that they want to focus on industrial earnings. In order to do that, the conglomerate must continue cutting down on its financial service offerings.