Despite loss of biggest headquarters, Louisville officials optimistic about Humana sale
By Chris Otts and Marcus Green
LOUISVILLE, Ky. (WDRB) – Louisville is set to lose its most valuable corporate headquarters as a result of Aetna’s pending $37 billion purchase of Humana, Inc.
But with Aetna promising to keep a significant employee base in Louisville, Mayor Greg Fischer and other local and state leaders say the deal could actually end up benefitting the city.
“There will be cities that win and lose in this,” Fischer said Friday. “And you know, Humana’s not just in Louisville and Aetna’s not just in Hartford. … We intend to be one of the winning cities.”
Assuming regulators approve the deal and it closes on time next year, the combined company’s headquarters will be in Aetna’s Hartford, Conn., home.
But the company’s government insurance business – Medicare, Medicaid and the military program TRICARE – will be based in Louisville, according to Humana
The companies’ decision to keep those three business units here is a “big deal,” because they account for the majority of Humana’s revenue and Louisville employee base, said Kent Oyler, President and CEO of Greater Louisville Inc.
“From a jobs standpoint, that makes us optimistic,” Oyler said.
In fact, the division of the combined company that will be based in Louisville will bring in more revenue than Humana does now – and will represent 56 percent of the combined company’s revenue, Fischer said.
“I think it’s very fair to speculate and say it will lead to more jobs based on what has been announced with this transaction,” Fischer said.
Humana couldn't immediately say Friday just how many of its current local jobs – more than 12,000 in all – are within the Medicaid, Medicare and TRICARE divisions. Company spokesman Tom Noland said he was working to find out.
Despite officials’ attempt to couch the sale as good news, the prospect of job consolidation now looms over Louisville, as part of the justification for corporate mergers is reducing expenses through eliminating duplicate positions, said University of Louisville finance professor David Dubofsky.
“Every time two companies combine, you have people doing the same jobs,” Dubofsky said in a late-June interview before the sale was announced. “You don’t need two people doing the same thing, so there is going to be layoffs.”
In a document distributed to employees Friday, Humana said Aetna “recognizes that Humana’s associates have been an integral part of our company’s success.”
But the company seemed to concede that some jobs will be affected: “While some change can be expected, it is premature to discuss specifics. We expect Humana’s associates to be an important part of the Aetna team.”
A homegrown company
Humana is by far the biggest of Louisville’s three Fortune 500 companies (the others are Yum! Brands and Kindred Healthcare), and it’s the largest corporate headquarters in Kentucky.
Louisville businessman David A. Jones Sr. and his late business partner Wendell Cherry founded Humana in 1961, expanding the original nursing home business into the hospital and health care industries.
Humana is now the second-biggest private employer – and third-biggest overall – in the 12-county Louisville-Southern Indiana metro area, according to Business First of Louisville.
The company also has left its mark on the local skyline. In the 1980s, Jones and Cherry commissioned well-known architect Michael Graves to design Humana’s headquarters building at Fifth and Main streets – a project Graves called one of his top three buildings in a 2007 interview with The Courier-Journal.
Fischer said he was told by Bruce Broussard, Humana’s president and CEO, that the Humana Foundation is not part of the deal and will remain in Louisville. Humana and the foundation have given $250 million to support Louisville-area groups in the last 40 years, according to the foundation’s website.
That support includes more than $20 million since 1979 for the annual Humana Festival of New American Plays at Actors Theatre.
And Humana’s value to the city extends past the number of jobs it provides, but the fact that those positions are the high-paying, white-collar roles that cities prize.
The company is Louisville Metro government’s single-biggest source of taxes withheld from paychecks – despite having fewer employees than UPS and Jefferson County Public Schools, according to metro government’s latest annual audit.
Local officials want to woo Aetna
And with the combined company’s headquarters in Connecticut – and Aetna CEO Mark T. Bertolini remaining at the helm -- it’s those top corporate management jobs that appear to be the most endangered in Louisville.
The sale of a company based in Louisville hasn’t always fared well for the city. R.J. Reynolds Tobacco’s purchase of Louisville’s Brown & Williamson Tobacco in 2004, for example, resulted in the loss of 450 jobs at B&W that accounted for an estimated $37 million in area spending.
But Fischer cautioned that each transaction must be viewed individually. And Larry Hayes, Kentucky’s outgoing economic development secretary, said the recent sales of Jim Beam and Maker’s Mark – both “iconic brands to Kentucky” – to Japan’s Suntory has not adversely affected local jobs at those companies, which have only gotten stronger.
“Look at the investment and look at the market share that they are going to grow and the global reach of that opportunity,” Hayes said.
Fischer and Hayes signaled that Louisville might eventually be in a position to compete for the combined company’s headquarters – or at least land some executive jobs. But Aetna has given no indication it’s interested in relocating.
“We’re really optimistic that we’re going to have a chance to be able to sit down with them,” Hayes said.
Oyler, of the chamber of commerce, said the sale may highlight Louisville’s reputation as a place to grow a company.
“That gets the notice that perhaps you can build a company like Humana in Louisville, Ky., and get $37 billion for it in a sale,” he said. “I hope that can play well with other corporate headquarters to look at and say, ‘We can do business and we can build a successful company in Louisville, Ky.’”
But with the fate of a homegrown company now in the hands of decision-makers in another state, Oyler said the sale only underscores the need for more entrepreneurial activity that might create the next highly valuable, local company.
“It’s time to double-down on economic development,” Oyler said. “We have got to grow more Humanas. We need more companies like them.”
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