Former UBS-owned entity GAM Restructures

Swiss fund manager GAM founded in 1983 by Gilbert de Botton, and later acquired by UBS in 1999, who sold it to Julius Baer, is executing on a restructuring plan put in place by David Jacob, interim Chief Executive, a dual UK-US citizen, who replaces Alexander Friedman, a former Chief Investment Officer at UBS Wealth Management with an MBA from Columbia. This involves consolidating various teams, including bringing European equities into a single team. In fixed income, four strategic areas have been identified - emerging markets, global credit, structured credit and global strategic bonds. Blackrock owns just over 3% of GAM.

New CEO Larry Culp Cuts GE's Dividend to 1 cent per share

Larry Culp cut GE's dividend to 1 cent per share from its quarterly level of 12c per share, saving GE around $3.9bn a year. Despite the loss of dividend shares rose.

Larry Culp is known for his "hands-on" approach, having cut his teeth from the age of 37 as CEO of Danaher. He has a BA from Washington College and an MBA from Harvard Business School. He is the first outsider to lead GE, ousting former incumbent John Flannery (who was a 30 year veteran of GE taking the reigns from Jeff Immelt). On Larry's appointment, shares surged 10%.

GE's debt, complexity of corporate structure and bad deals have contributed to its troubles. This has wiped off half a trillion dollars of market value over the past 18 years (its market value peaked in 2000). GE Power is one of its worst performing divisions reporting a 33% decline in Q3 sales. Renewable energy generation is taking away some of its business.

A bright spot in GE's business is GE Aviation, where sales have climbed 12%, in which the company builds jet and turboprop engines (engines that drive aircraft propellers). The division also has a Digital subdivision which offers products in the cloud aimed e.g. at aircraft maintenance records (AVRAD).

IBM to Buy Red Hat for $34bn in "Software for the Cloud" Transaction - Cops 5% Loss on Stock Price, RH up 45%

IBM (NYSE:IBM, Beta 0.87, PE 20x) has confirmed it will pay $190 per share for Red Hat (NYSE:RHT, PE 77x - clearly will push up as people buy up the target), a 60% premium to the current stock price. IBM shares traded down 5% mid afternoon New York time, with some bounce back towards the close, and a traded volume of around 17.5 million (average volume is around 2m).

In terms of approvals, IBM already has the approval from the Boards of Directors of IBM and Red Hat. Shareholder and regulatory approvals are remaining now.

Key management include

• IBM CEO Virginia (Ginni) Rometty (a Computer Science and Electrical Engineering graduate from Northwestern)
• IBM CFO James Kavanaugh (appointed January 2018), also oversees Transformation and Operations. He has an MBA from Ohio State and joined IBM in 1996 from AT&T.
• Red Hat CEO Jim Whitehurst (a Computer Science and Economics graduate from Rice in Houston) who began his career at the Boston Consulting Group. He was also COO of Delta Air Lines for 6 years overseeing all aspects of Operations from Sales to Strategy.
• Red Hat CTO Chris Wright,  who has spent time working deep in the Linux kernel.

The focus of the acquisition is software for the cloud (Dell EMC was bigger at $67bn but that was both hardware and software).  This will allow IBM to tap into a market where they estimate 80 percent of business workloads have "yet to move to the cloud". Linux, containers, Kubernetes and multi-cloud management are all on the cards in the new world of IBM. "Open hybrid cloud" is the mantra of the deal.

The acquisition is designed to be free cash flow and gross margin accretive within 12 months. IBM has also expressed commitment to growing its dividend and maintaining strong investment grade credit ratings. It will target a leverage profile consistent with mid to high single A credit rating.

Jim Whitehurst stated that Red Hat is the leading open-source software business, with growth in 66 consecutive quarters, and could leverage IBM's scale and infrastructure and depth in customer relationships to continue its growth journey. He also mentioned that Red Hat and IBM have partnered over 20 years. Ginni Rometty stated "this lifts all boats for IBM" and that the deal prepares IBM for the "second chapter of the Cloud".

Micron Bets Big on AI to Boost Chip Sales with $100m Venture Fund

Nasdaq-traded Micron Technology (MU, non dividend paying, Beta of 2.27) is betting $100m that AI will ramp up demand for its memory chips. Sanjay Mehrotra, CEO, and former co-founder of SanDisk, spoke highly of the big opportunities ahead which will increasingly require better "memory and storage technologies" to galvanise the operation of neural networks at the heart of machine learning applications. Micron's premise is that machine learning workloads (training process) require six times more DRAM per server and double the SSD capacity than a standard cloud server. The memory bottleneck additionally requires investment in the much touted HBM or high bandwidth memory - Micron's offering in this space takes the shape of hybrid memory cubes (HMC). Samsung and Hynix ("Innovation from Within") are the current market leaders in HBM.

KKR Bids to Grow Portfolio of Tech

KKR has bid A$1.75bn to takover MYOB Group (MYO.AX) which if successful would make it KKR's biggest acquisition in Australia and go a long way to growing its portfolio of tech businesses. MYOB said its board was studying the non-binding offer.

Australia Mortgage Lenders Bought up by US Private Equity Firms

KKR, Blackstone and Cerberus are all in on the game.

Unraveling of Swiss Banking Secrecy Laws

The Federal Tax Administration (FTA) has for the first time shared data on 2 million accounts under the framework of the new AEOI (Automatic Exchange of Information), relevant to EU states as well as a further nine states and territories (states e.g. Australia, Canada, South Korea, territories e.g. Isle of Man, Guernsey, Jersey).