It's difficult to tell if this is a good idea before seeing the prospectus for the new fund, but it is in innovative way to launch a CEF. As far as I know, GAB is the only closed-end fund that has had spin-offs in the past. The proposed contribution to the new fund is fairly small at $60-$100 million, but I'm sure there will be future rights offerings to raise more money.
Overall, I don't know if this will be good for shareholders, but I don't think it will be bad for them. They should get shares in the new fund without having to pay any commissions or underwriting fees, but it's possible that the shares could trade at a discount shortly after they are distributed. If there are a lot of shareholders who do not want this type of focused fund, and therefore sell immediately after receiving their shares, this could cause the market price to drop below its NAV. On the other hand, since it appears that shares of the new fund will only be offered to current GAB shareholders, demand from outside shareholders could move the fund to a premium once it starts trading on the secondary market. Either way, I don't think anyone can complain too much about the spin-off since current GAB shareholders will be given the choice of whether or not to approve it.
GAB 1-yr chart: