Power Sheet – October 14, 2015

Massive-scale strategic redirection is one of the most important things a CEO can do, and this week we see three of the highest-profile CEOs of the past 20 years doing it. It’s fascinating to observe because – as with all real leadership decisions – success is far from certain.

-General Electric chief Jeff Immelt has sold a $32-billion portfolio of loans and leases to Wells Fargo, the latest move in his strategy of abandoning GE’s giant finance business and transforming the company into a 21^st-century web-enabled industrial enterprise. He’s making it happen with blazing speed; since announcing the strategy six months ago, he has sold over half the $200-billion-plus of assets he aims to off-load, putting him way ahead of schedule. Nonetheless, this is a multi-year project, and investors aren’t yet persuaded the bold new strategy will work. The stock has risen in the past week, but it’s only back to where it was after spiking on Immelt’s April announcement that he was divesting GE Capital.

-Anheuser-Busch InBev CEO Carlos Brito finally convinced SABMiller to sell itself, for $104 billion. If the deal closes – regulatory approvals will take months – it will be one of the biggest deals ever, and AB InBev, already the biggest brewer ever, will be a whole lot bigger. The move is certainly bold, but it’s also worrisome. That’s because global beer consumption is shrinking, and this merger is mostly a move to give AB InBev sufficient scale to raise prices and cut costs. Brito is putting a staggering sum of new capital into this grindingly competitive business, and his ability to earn a return that beats his cost of capital – the most fundamental measure of business success – will be put to the test like never before. Investors would feel a lot more comfortable if he could also articulate a plan to get the world loving beer again. It ought to be possible. As he likes to say, beer is the original social network.

-The conventional view of Michael Dell’s $67-billion deal to buy EMC in the biggest technology deal ever is that it validates his decision two years ago to take his company private. The public equity markets, goes the argument, would have pummeled this bold, far-sighted redirection of the company because it will depress earnings before it raises them. And that’s likely true. But it’s also possible – and I’m not making any predictions – that public markets would have pummeled the move because they didn’t think it would work. Dell’s biggest business, PCs, is brutally commoditized, and EMC’s main businesses of storage and virtualization are attracting much larger competitors, like Microsoft. So a private company did a deal that a public company probably couldn’t have done. But whether it’s a good deal is a separate question.

It’s often observed by confused students of finance that big risks lead to big rewards. No, big risks lead to big rewards or big losses; in the language of finance, risk means variability, down as well as up. Immelt, Brito, and Dell are taking huge risks, and like all leaders worthy of the name, they believe their leadership can carry the company past the dangers to a glorious result. Now we’ll see if they’re right.

What We're Reading Today

GE sells commercial lending business for $32 billion

CEO Jeffrey Immelt's continued efforts to unwind GE's finance arm took a gigantic leap yesterday as it sold its commercial lending and leasing business to Wells Fargo. As GE transitions its focus back to industrial manufacturing, it has unloaded $126 billion in assets since April. Reuters

Fed officials showing signs of disagreement over hike

Federal Reserve Governor Daniel Tarullo says that he wouldn't expect an interest rate hike to come this year without signs of increases in inflation and wages. He's the second Fed official to signal a desire to wait on an increase this week. This goes counter to Fed Chairwoman Janet Yellen's statements that a Fed hike would likely occur this year. CNBC

Goldman Sachs probed in international money laundering investigation

The FBI and Justice Department have started questioning the bank's role in a number of transactions by 1Malaysia Development Bhd (1MDB),which is currently under investigation from five different countries over billions of missing dollars. Authorities said there's no suspicion of wrongdoing on the part of Goldman at this time. WSJ

CEO stabbed after losing investment

As the markets continue to slide in China, it's taking its toll on investors. In a sign of how bad it has become, a CEO at an investment firm was stabbed at a meeting after the accused assailant lost $50,000 in the company. Global Wealth Investment's Wang Jie remains in a coma, following the attack. MarketWatch

Building a Better Leader

Small firms try a radical experiment...

...with a strict 40-hour workweek. It's attracting recruits and making employees more efficient. WSJ

Mental competency tests at the C-Suite are common

Sumner Redstone's experience at Viacom isn't unusual, but there isn't a strong definition of competency. Coins2Day

What will really drive up wages?

Demand for top-level talent. Inc.

Dems Debate

Hillary Clinton dominates first debate

While Vermont Sen. Bernie Sanders recovered from a slow start, Clinton showed poise and force while tackling issues, such as gun control and Wall Street. It was a huge win for Clinton as Sanders creeps up in the polls in Iowa and New Hampshire. The other three candidates - Jim Webb, Martin O'Malley and Lincoln Chafee - did not stand out. Coins2Day

Clinton pushes back on the email inquiry...

...and gets a nice assist from Sanders. Responding to her use of personal email while serving as Secretary of State, Clinton said that voters are tired of hearing about it and admitted she made a mistake in using her personal account. Sanders even came to her defense, saying "that the American people are sick and tired of hearing about your damn emails." NBC News

Biden's run becomes less likely

Clinton's victory on Tuesday night may have convinced Vice President Joseph Biden not to enter the race. After Democratic strategists showered her with praise following her performance, they expect donors to also link themselves to Clinton. This could put Biden at a huge disadvantage. Washington Post

Up or Out

Former co-Chair of Universal Pictures David Linde will become CEO of Participant Media. NYT

Under Armour COO Brad Dickerson will step down from his role in February 2016 to pursue another position outside the company. Coins2Day

Tyco has named Robert E. Olson its next CFO beginning in November, replacing the retiring Arun Nayar. Security Systems News

Daniel Florness will become Fastenal's CEO at the beginning of the new year. He will replace Willard Oberton at the top of the industrial equipment distributor. Minneapolis Star Tribune

Coins2Day Reads and Videos

Mary Barra: VW scandal won't happen at GM

At Coins2Day's Most Powerful Women Summit, Barra spoke about making sure your company represents your values. Coins2Day

Uber expands courier service in key markets

Drivers will deliver flowers, clothes, and food. Coins2Day

Whole Foods, the tech company

The grocery chain's co-CEO Walter Robb announced a new partnership with Infor to build cloud-based software for its supply chain. Coins2Day

Two journalists arrested on Tesla property

Tesla claims that the journalists were there illegally, leading to their arrest, including one for felony assault after an attempted getaway. Coins2Day