Welcome to the June 1 Monday Business Briefing, your private business intelligence digest from Insider Louisville.
Not one person we’ve talked to about the news of Humana exploring a sale had a good thing to say about what it means for Louisville.
The implications are clear: A sale would most likely imperil the jobs of at least some of the company’s 13,000 employees here. It would ding the city’s reputation among corporate leaders and leave Louisville with only two Fortune 500 companies. It could cause a serious interruption of one of the city’s biggest, most dependable sources of philanthropy. It could have a trickle-down effect that diminishes spinoff companies and innovation. And it could leave a real estate portfolio worth more than $100 million up for grabs.
Reading between the lines, it sounded on Friday like even Mayor Greg Fischer is resigned to the likeliest outcome here: that hiring Goldman Sachs to explore a sale amid Wall Street acquisition rumors isn’t just playing defense.
But if you’re one of the top six officials at Humana, chances are you have a different take. That’s because together, those guys — yep, all guys — are set to receive nearly $66 million if the company is sold, and if they lose their positions after the sale, according to Humana’s most recent proxy statement to the Securities and Exchange Commission. Here’s the pack of golden parachutes:
- Bruce Broussard, CEO: $16.9 million
- Brian Kane, CFO: $5.9 million
- Steven McCulley, head of Medicare Operations: $6.6 million
- James Murray, COO: $19.7 million
- Timothy Huval, Chief Human Resources Officer: $11.3 million
- Christopher Hunter, Chief Strategy Officer: $5.5 million
Talk about a soft landing. In its proxy statement, Humana says it opted for the “double trigger” — i.e., they can only receive those benefits if the company is sold and they lose their jobs — to encourage longevity in key positions. Which is a little humorous, as most of these executives have only been at Humana a few years. Broussard came to the company at the end of 2011 and assumed his role as CEO last year. Brian Kane joined the company last June, after spending 17 years at Goldman Sachs (that move itself invited some speculation about a sale at the time). Huval came on board in 2013. Hunter came on board in January 2014. McCulley and Murray are the only two Humana veterans holding these particular tickets.
Meanwhile, sources inside Humana tell IL that employees have been whispering a little more loudly about the possibility of a sale for at least the past several days, as the company has put a total freeze on hiring and promotions for an indeterminate amount of time.
We haven’t heard from Humana spokespeople on any of this, but that’s not surprising. When talk of an “imminent” takeover bid flared three weeks ago, spokesman Tom Noland kindly reminded media of the company’s longstanding policy not to comment on speculation.
Wall Street analysts have said for months to expect bigger consolidation in the health care industry, where Humana is among a handful of big players. The Louisville company has been coveted for its Medicare business — it’s the second-largest provider of the government program in the country, behind United HealthCare — and the takeaway in the financial press on Friday was that Aetna would be looking to add that arrow to its quiver to be more competitive with juggernaut United. A source with knowledge of the industry told IL on Friday afternoon that the Medicare business would be a natural complement for Aetna.
Leerink Partners analyst Ana Gupte, source of the original sale speculation, said Friday that a Humana sale would be the “first domino in overdue managed care M&A.”
GLI loses Churchill Downs, uncertainty remains as rebuilding continues
For weeks now, we’ve been hearing from sources in the economic development world that Greater Louisville Inc., the chamber of commerce, is struggling. They say it remains plagued by internal strife, big-time departures, and a general haziness about what it’s supposed to be doing nearly a year after Mayor Greg Fischer cut off its city funding and assumed control of economic development functions.
We’ve seen some of it play out publicly, with three recent departures, including economic developer and workforce VP James Reddish, who was going to help lead the chamber’s regional economic development office, one of its new overarching strategic initiatives.
Some of it has been less public. Late last week, GLI confirmed it had lost Churchill Downs, which canceled its membership within the past several months (a GLI spokesperson told IL it was an “internal business decision” for Churchill; their rep didn’t get back to us). That’s a huge blow at a time when the chamber needs certainty.
Meanwhile, seven of the top eight execs at GLI are new in the past year, which has led some insiders to raise questions about continuity. In total, about one-third of the employees at GLI today are new to the organization or their position there.
When Kent Oyler took over a chamber on life support a year ago, he laid out three key areas where it would focus: business growth and expansion, workforce development, and public policy. And while it’s made some strides in each, more notable perhaps are the setbacks, including a big loss in Frankfort over the local option sales tax.
Oyler chatted about all this with IL late last week. He wasn’t defensive, acknowledging that it’s taking some time to settle into the chamber’s new mission, get the right personnel to execute it, and convince the public it’s working.
“We’ve made tremendous progress since a year ago,” he said. “Clearly the organization had been left without permanent leadership for some period of time, so there was a lot of deferred maintenance.”
Oyler added that he knows expectations are high, and he acknowledged there’s been some frustration and mission confusion, particularly among the public. He said implementing Advantage Louisville — GLI’s plan for economic growth — is forthcoming, although funding hasn’t been secured.
Our takeaway: It takes awhile to right a ship this big, particularly one that’s lost an engine. A big win or two — and fast — would go far in quieting an increasingly uneasy econ dev class.
Swope Auto Group gets new look, management style
When Patti Swope took over her late father’s eponymous auto dealership group in January, she decided to make a few changes. She started big, upending the company’s longstanding management approach by giving affiliated dealers more freedom and autonomy than they’d ever had.
The changes, which Swope says are in part a response to drastic shifts in the auto sales market being driven by millennials, are culminating in the launch of a new logo, the company’s first redesign in decades.
“I think people are enthusiastically embracing the new culture,” she says.
Staff at the company’s 11 Louisville new-car dealerships (plus one in Richmond, Ky.) and four used-car dealers are already changing their approaches, she says, to better orientate to a changing customer. For instance, car buyers are most likely to come in knowing not just what they want — from make and model to interior features — but almost everything about it. So Swope is looking at product specialists and delivery specialists who are there to close the deal more than make it, she says. She’s been providing training to get that part right.
“I think it’s been a long time coming in our business,” she says of the changing customer base, “and i don’t think it’s anything we can’t handle.”
Memorial Day weekend was the traditional kickoff of the selling season, Swope says, so she won’t know until fall whether the new strategy is paying off. We’ll keep an eye out.
Something’s brewing with America the Diner: Earlier this year, Dustin and Kyle Staggers of Roux announced they were bringing a new concept, America the Diner, to 814 Cherokee Rd., at the edge of the park. The neighbors objected, and ever since it’s been crickets. Well, something’s up: On April 23, a trust took control of the building for $925,000. And the word in the neighborhood is that Matthew Barzun, the U.S. Ambassador to the United Kingdom who also owns a house across the street from the proposed diner, is the key player in it. We called Gant Hill and Scott Howe, the brokers on the original deal, but neither would comment. Stay tuned.
Capture Higher Ed gets $900K in tax incentives: Louisville’s Capture Higher Ed just received preliminary approval for $900,000 in tax incentives from the Kentucky Economic Development Finance Authority, and the fast-growing firm plans to use the dough in a host of ways. Ellen Stubbs, VP of sales and marketing at Capture, said the company has grown 320 percent over the past three years, and it’s already outgrowing its 5,500-square-foot space. The funds, she said, would help add more space to the current location. Also, the firm is looking to buy what Stubbs called “visual software” that will help present data trends in a clear way for the firm’s partners. Stubbs said the incentives may also help Capture make some new hires. —David Serchuk
A new offering from Papa John’s: We got a tip last week that it was “all hands on deck” at Papa John’s headquarters, and by Friday we knew why: The company just launched “cinnamon knots,” a followup to its successful garlic knots launch a few months back. PJ’s chief marketing officer Bob Kraut said high demand for the garlic variety led them to a cinnamon version, which the company turned over in just a few weeks.
Facilities Management Services gets incentives, may locate HQ in Louisville: Commercial janitorial firm Facilities Management Services (FMS) has received preliminary approval for $450,000 in Kentucky Economic Development Financial Authority (KEDFA) tax incentives. Agency docs say the money is going to the company due to its growth in services, and because it’s considering putting a headquarters in Louisville. FMS has three locations in Kentucky, including one here, as well as one location in New Albany, Ind. Anna Beth Bobbitt, a project manager for the Kentucky Cabinet for Economic Development, said KMS requested preliminary approval for KEDFA incentives to gauge what they could get. “They haven’t made a final decision whether to go to Indiana or here,” she said. KMS has 800 employees. Expect the call soon. —David Serchuk
Omnicare Louisville expansion on hold: Sources inside the Cincinnati-based pharma giant tell IL plans to expand the company’s Louisville workforce are on hold after the announcement last week of a $12.7 billion takeover by CVS. Omnicare had been approved by the Kentucky Economic Development Finance Authority for incentives in support of an expansion that it said would add 80 workers. The company has less than 100 workers in Louisville, but its subsidiary, the homegrown RxCrossroads, has more than 400. It’s merger city around here.
CompleteSet is now on iPhone: Velocity grad CompleteSet, which is based in Cincinnati, is now part of the Apple universe. And with it, the company is promising a new way to collect comic books, video games, toys and more. CompleteSet provides a web and mobile platform for enthusiasts to find collectible toys and other hard-to-find products. The app is free in the App Store. And the local-ish tech firm keeps growing.
Uncle Maddio’s closes; Fontleroy’s is next: IL reported a few weeks ago that Uncle Maddio’s Pizza Joint, the chain at the corner of Bardstown Road and Grinstead Drive, was closing, to be replaced by something called Fontleroy’s. Nobody would confirm it for us. Now, the joint is locked up with paper over the windows. But we’re still not sure what Fontleroy’s is, other than a place that’s applied for a liquor license. The attorney who represents the owners of the new place said he’d get back to us; nothing yet.