Welcome to The Closing Bell. This is your last stop for biz scoops and big news before the weekend — a roundup of stories that can’t wait till Monday.

Aetna/Humana would become the nation's second-largest health insurer by revenue if the sale is approved by federal regulators. | Source: Aetna-Humana presentation to investors
Aetna/Humana would become the nation’s second-largest health insurer by revenue if the sale is approved by federal regulators. | Source: Aetna-Humana presentation to investors

Following the early July announcement that insurance firm Aetna agreed to purchase Louisville’s Humana, the Connecticut-based company’s CEO, Mark Bertolini, conducted a fairly extensive interview with Institutional Investor magazine. In it, he showed a progressive side, specifically on the issue of wages for Aetna workers. He also revealed that the Aetna/Humana deal got rolling — and was perhaps even decided — months before it was officially announced.

In early January, Bertolini announced Aetna’s new minimum wage would rise to $16 company-wide, which was enacted in April. It’s projected that 5,700 Aetna workers have gotten a raise as a result — by an average of 11 percent, although some workers saw a jolt of as much as 33 percent. Bertolini said the raises would cost Aetna $26 million, but he believes it will save the company $120 million over time by promoting greater worker retention. Bertolini had missionary zeal about the raises. “If we’re going to reinvigorate the company, we have to restore the middle class,” he said.

Bertolini also said the move would help Aetna as the health care landscape shifts to more of a retail market.

“And a retail market requires a person on the front lines taking care of our customers in very different ways than in the past,” he said. Paying employees enough so that they don’t have to worry about their own health care both builds their relationship with Aetna and improves customer service, he said.

IL asked Humana spokesman Tom Noland what that company’s current minimum wage is. He said the firm assesses all roles each year by market standards and compares them to other similar companies. “We then review multiple wage and salary surveys to ensure that we pay our associates on a market-competitive basis,” he said.

In the interview, Bertolini also said he and Humana CEO Bruce Broussard first seriously discussed a deal months before it was announced. “Quite frankly, the ‘yes’ didn’t come until March 28, when I sat down with Bruce and had my very first conversation with him about whether he was ready. He said yes, and that’s what began the conversations.”

The deal was announced July 3.

In other Broussard news, the investment site Seeking Alpha recently analyzed the changes made to his severance package, aka his “golden parachute,” should he lose his job due to Humana getting acquired. As reported by IL, public documents revealed Broussard’s severance agreement was changed on July 2, the day before the deal was announced. Those changes ensured Broussard’s time-based stock options and equity awards, as well as his performance-based stock options, would become vested immediately should Humana be purchased and Broussard not continue with the new company.

In his initial agreement, Broussard was to receive $16.9 million severance. But Seeking Alpha reported that with the accelerated changes, Broussard’s severance would rise to $46.5 million. Shareholders will have the chance to vote on these changes via the “Say on Golden Parachute” rule, which was enacted in the Dodd-Frank Wall Street Reform and Consumer Protection Act. Such votes are advisory, however; Humana’s board of directors doesn’t have to follow what the shareholders decide.

In response to questions regarding when the deal was first agreed upon, as well as Broussard’s potential compensation, Noland said via email: “As with all transactions of this kind, Aetna and Humana will soon file a proxy in which these items will be discussed.”

Betting the Brown-Forman arbitrage

Brown-FormanLOGO-wIn early June, we took a look at Brown-Forman’s two classes of shares — and specifically, how they had started to diverge in price. That’s an anomaly, as the A and B stock usually trade close together, although the two are slightly different in nature: The A shares are mostly controlled by corporate insiders, including the Brown family, and the B shares are what the general public typically buys.

At the time, the investing gurus at Seeking Alpha were recommending shorting the A shares, which were trading at a premium to the B shares, and going long the B shares, because the gap would close over time.

So how would the strategy have worked?

The B shares have started to close the gap with the A shares, as predicted. Since June 3, the B shares have risen 12.6 percent to $106.30. Over the same period, the A shares have risen 8 percent to $116.50. General markets have been flat. So betting on the B shares was the smart money, and it looks like it might still be the smart money, as the gap hasn’t fully closed. The price-to-earnings ratio of the B shares is 33, while the A shares carry a heftier tag at 36. And even now there is still a divergence, so the potential for gap-closing bets might still be alive.

Churchill Downs a good bet despite losing OTB deal

churchill downsLouisville’s CHDN just announced earnings, and investors are betting for the firm to keep its stock’s winning streak alive.

Revenues for the quarter came in at $409.2 million, a record. A big part of this boost came from the $104.5 million in revenues generated by Big Fish Games, which CHDN acquired in the past calendar year, but even if you removed the game company, CHDN still beat last year’s revenues year-over-year.

Net earnings came in at $3.10 per share in the quarter, down from the prior year’s $3.21. Investors liked what they saw here, even with the down earnings, and CHDN’s stock was up close to 5 percent on the day as of midday Thursday, to just over $133 per share.

The stock’s jumping even though news recently broke that New York’s Off-Track Betting corporation is cutting ties with CHDN, due to what it felt were exorbitant rate increases. CHDN demanded OTB pay a rate increase of 29 percent for 2014 versus 2013, in exchange for allowing OTB to broadcast the 2014 Kentucky Derby. Michael Kane, CEO of OTB, characterized CHDN’s actions as “nothing less than extortion.” So they said bye-bye.

CHDN’s been a fast-running stock in 2015, up 37 percent this calendar year while the general markets are grinding out 2.5 percent gains. It keeps on climbing although its P/E ratio is over 50.

In Brief

Papa John Schnatter gets hands insured for $15 million: Lloyd’s of London is reportedly insuring the hands of Louisville-area pizza kingpin John Schnatter for $15 million, according to a report from the London Daily Mail. IL contacted a company spokeswoman to learn more about this insurance policy; so far we haven’t heard back. But it goes without saying: If the CEO and founder of Papa John’s is still using those paws to make actual pizzas, it’s probably not a good sign for his company, right? FWIW, in 2014 Schnatter earned $3.5 million in total compensation.

KFC introduces new chicken bucket that also prints pictures from your phone: Louisville’s KFC has been on the marketing warpath, what with reintroducing Colonel Sanders and all. Now they’ve added a new product that is sure to get ticked off someone’s bucket list, if you can forgive the pun. It’s called the “Memories Bucket,” and it’s being released to celebrate 60 years of KFC Canada. In short, the bucket not only holds chicken — as if that weren’t enough — it is also a Bluetooth-enabled printer. Meaning you can synch it with your phone, and the bucket spews out Poloroid-esque pictures from your device. According to Yum! Brands spokeswoman Virginia Ferguson, the buckets will only be available in Canada, meaning the best we can do is a photo. Want to see the bucket in action? Here’s the YouTube video to put it all in perspective.

Copper & Kings nabs national spotlight: We first told you about Joe Heron’s unique barrel-aging method of serenading his brandy with rock ‘n’ roll back when we wrote about Copper & Kings in early 2014. Well, the national media is finally catching wind of the avant-garde distillery, and just this month it’s been featured in Vice.com, Food & Wine, the A.V. Club and more. A snippet from the Vice piece details the music Heron and his brandy prefer: “They celebrate holidays: On July 4, Springsteen, Hendrix, Kravitz, and Bowie rounded out a medley of independence-themed songs queued to get the aging all-American spirits in a patriotic mood. And on other days it’s just based on the distillers’ tastes — anything from My Morning Jacket to death metal to jazz.” Kudos to Copper & Kings for stealing some national attention away from that other brown spirit Kentucky is most known for. —Sara Havens

The ice is hot: The Opal Nugget Ice Maker by FirstBuild continues to burn up Indigogo. As we reported on July 28, the campaign raised double its $150,000 goal in just over 12 hours. Three days into the campaign, it appears FB is earning around $10,000 an hour. Any number we put on the “amount raised” for the Opal will be outdated as soon as we write it. Needless to say, it will surprise no one when this tops $1 million. It’s currently “trending” on the IndieGoGo technology page. The nugget ice craze is so strong that Maxim magazine even took time out of their boobs and booze coverage to write “Ice Freaks Love GE’s New Weird Ice Machine.” —Melissa Chipman

There’s always money in the lemonade stand: The Clark-Floyd Counties Convention & Tourism Bureau, the Jeffersonville City Council, and the Clarksville Town Council will be serving up lemonade at a stand at 5th and Main streets in downtown Louisville today — basically to remind you that Southern Indiana is still up there despite the “big squeeze” of the I-65 lane restrictions. “Beat the Squeeze” is a campaign to remind people that traffic isn’t all that bad except during rush hour, “when traffic crawls on almost every metro-area interstate.” Southern Indiana is “Wide Open Noon, Nights & Weekends,” according to the campaign, any of which — in their humble opinion — is the perfect time to go over and patronize area businesses. The campaign was created by Current360. Enjoy your lemonade between 11 a.m.-1 p.m. May you still be refreshed when you’re idling in your car at 5 p.m. —Melissa Chipman

David Serchuk
David Serchuk is a staff writer at Insider Louisville. He is a former editor at Forbes.com, and an ex-reporter at Forbes magazine. He's written for NPR, CNBC.com, New York, Pittsburgh, Louisville and other publications named for places. He enjoys writing about business, music and other things as well.