Day: July 21, 2016

BULLETIN: DOJ SUES TO HALT BLOCKBUSTER HUMANA-AETNA AND ANTHEM-CIGNA MERGERS; VOWS TO FIGHT, BUT STUNNING MOVE CASTS SHADOW OVER COMPANY AND CITY

In a pair of widely anticipated lawsuits, the Department of Justice said the two multi-billion dollar mergers would reduce competition, raise prices for consumers and stifle innovation if the number of large, national insurers were to fall from five to three, according to Reuters and multiple other news outlets. Latest news developments at 4:19 p.m.

Loretta Lynch
Lynch

“We will not hesitate to intervene. We will not shy away from complex cases,” U.S. Attorney General Loretta Lynch told a news conference today. “We will protect the interests of the American people.”

Although the DOJ had signaled its opposition a week ago, today’s suits were still a stunning turn of events for Humana, which announced its planned $37 billion tie-up with Aetna of Hartford a year ago. The agency’s move immediately threw into doubt the future of the Fortune 500 company, founded in 1961 by attorneys and Kentucky natives David A. Jones and Wendell Cherry with a single nursing home. With 12,500 workers in Louisville alone, it’s one of the city’s biggest private employers.

The DOJ’s move was the latest example of the Obama administration challenging massive combinations in major industries, from oilfield services to telecommunications, according to Reuters. “We have no doubt that these mergers would reduce competition from what it is today,” said Principal Deputy Associate Attorney General William Baer, who spearheaded the antitrust reviews.

Humana shares roared 8% higher, closing at $171.53 a share, up $13.12, after the news broke shortly before noon. That gain may be due to the insurer’s raising full-year earnings guidance. In a press release amid the DOJ news, Humana said the higher guidance is primarily the result of better-than-anticipated year-to-date performance for its individual Medicare Advantage and Healthcare Services businesses, partially offset by continued challenges in the individual commercial medical business. Humana also said it plans to exit eight of 19 state Obamacare health care exchanges.

The stock’s rise may also reflect Wall Street’s preference for certainty over doubt. With the DOJ’s suit, stockholders now know what may be the worst. More than 10 million shares changed hands by the close of trading at 4 p.m. ET, nearly four times average volume.

Aetna’s stock rose a slimmer 1.6%, closing at $118.30. Unlike Humana’s, Aetna’s shares hadn’t been beaten down as much in the week since the DOJ’s opposition became clear last Thursday and Friday.

Will ‘vigorously defend’ plan

In the Humana-Aetna case, the government focused on the companies’ offering for Medicare Advantage and their ability to compete on public exchanges that were set up by the Affordable Care Act, according to The New York Times.

Humana logoHumana and Aetna said they would “vigorously defend” their pending merger. The Hartford company said previously that it would challenge a DOJ decision to block the merger, the Times said. Cigna said it was evaluating its options but did not expect the transaction to close anytime soon, “if at all.”

Mark Bertolini
Bertolini

Aetna CEO Mark Bertolini said the company has proposed divesting enough assets to ensure competition in markets where it overlaps with Humana.

“If we can’t come to a negotiation on what markets to divest, although we have two very complete remedies in front of the Department of Justice now, I think I’m willing to let a judge decide,” Bertolini told business news channel CNBC, according to Reuters. “We’ll go all the way we need to make this happen.”

At least two states joined the DOJ suits. Illinois moved against Humana-Aetna, according to the Chicago Tribune, and Tennessee against Anthem-Cigna, said the Knoxville News-Sentinel.

Frank Morgan and his team at RBC Capital Markets looked at a review by international law firm Arnold & Porter of the more than 1,600 proposed mergers in 2015, of which the FTC and DOJ collectively brought formal actions in 34 cases, according to Barron’s.

“Of these, the vast majority (23 or 68%) were resolved by consent decree,” the RBC team found.

Would create a colossus

But for Humana-Aetna to reach such a settlement, they might need to so fundamentally alter the deal’s terms that it no longer makes business sense.

Humana building
Humana Tower.

If it can be salvaged, it would create an insurance colossus, with a combined $114 billion in annual revenue, up to 60 million members, and 110,000 employees. Humana has more than 21.3 million members and does business in all 50 states. It has approximately 50,000 employees, including those nearly 13,000 in Louisville housed in the company’s iconic skyscraper on Main Street downtown. Last year’s Humana revenues were $54 billion.

Anthem and Cigna announced their proposed $48 billion merger on July 24, three weeks after Aetna and Humana announced their own deal.

48 years ago: Cops under attack, terrorism warnings in U.S., and racial unrest at a Louisville amusement park

Chicago police 1968
Chicago police attacked protestors outside the Democratic convention in August 1968.

By Jim Hopkins
Boulevard Publisher

It’s summertime at the height of the presidential nominating contest, and the nation is transfixed by civil unrest: Protestors are attacking police amid dark warnings about terrorism on the streets and claims the powerful news media is spreading liberal propaganda.

Richard Daley 1968Sound familiar? It should, because that was the scene 48 years ago this summer, when Democrats gathered in Chicago for a convention to pick Vice President Hubert Humphrey of Minnesota and Sen. Edmund Muskie of Maine as their nominees for the 1968 presidential elections.

On The Courier-Journal’s front page that Friday morning, Aug. 30, 1968, a headline told the story: “Angry Daley Defends Police; Assails Press.” From Chicago, New York Times correspondent R. W. Apple Jr. wrote:

Infuriated by attacks upon himself, his city and his police force, Mayor Richard J. Daley yesterday defended the manner in which anti-war, anti-Humphrey demonstrations were suppressed in downtown Chicago Wednesday night.

Daley described the demonstrators as “terrorists” and said they had come here determined to “assault, harass and taunt the police into reacting before television cameras.”

“In the heat of emotion and riot,” Daley said, “some policemen may have over-reacted, but to judge the entire police force by the alleged action of a few would be just as unfair as to judge our entire younger generation by the actions of the mob.”

Daley Convention 1968
A defiant Mayor Richard Daley on the convention floor reacts to criticism Chicago police were overacting to protests outside.

In fact, an independent study found four months later, the clash between 10,000 protestors and police devolved into a police riot when officers broke through and began beating one man as the crowd pelted cops with rocks and chunks of concrete. Protestors’ chants shifted from “hell no, we won’t go” to “pigs are whores.”

By then, civil unrest had come to Louisville in a different form: A popular amusement park reserved for whites for six decades had been integrated four years before. Fontaine Ferry Park would be heavily vandalized during racial turmoil less than a year after the Chicago convention.

Fontaine Ferry Park ad August 30 1968

None of that was reflected in an advertisement that Aug. 30 on page 21 Continue reading “48 years ago: Cops under attack, terrorism warnings in U.S., and racial unrest at a Louisville amusement park”

BF starts distribution system in Spain; GE Appliances owner Haier dragged into GOP China politics; and Tenn. man arrested over 20 lbs. of marijuana allegedly shipped via UPS

A news summary focused on 10 big employers; updated 4:55 p.m.

BROWN-FORMAN announced this morning that it’s launching its own distribution network in Spain, Europe’s third-largest whiskey market and the world’s ninth-biggest overall. The Louisville spirits giant will add about 40 employees in the expansion. The current distributor is Importaciones y Exportaciones Varma S.A. under a contract that will end June 30, 2017. “Establishing our own distribution organization in Spain will support the development of the Jack Daniel’s trademark as well as our broader portfolio in this dynamic market where premium spirits are growing,” said Thomas Hinrichs, president of Brown-Forman’s Europe and Asia markets.

Spain will join Australia, Brazil, Canada, China, the Czech Republic, France, Germany, Hong Kong, Mexico, Poland, South Korea, Thailand, Turkey, and the U.K. as markets where Brown-Forman owns or directly manages its own distribution. (press release). The company employs 1,300 workers in Louisville and another 3,300 across the U.S. and around the globe.

Trump and Pence
Trump and Pence

GE: Haier Group has been drawn into the bitterly contested Republican race for the White House, less than two months after the Chinese company completed its $5.6 billion purchase of GE Appliances. The conservative Federalist website says Indiana Gov. Mike Pence’s past support of Haier’s research and development center in Evansville, Ind., is an example of the politician’s helping China “steal” U.S. jobs. Although Donald Trump has run on a campaign attacking U.S.-China trade, the website implies his selection of  Pence as running mate casts doubt on the GOP nominees’ anti-China bonafides (Federalist). In the past, the site has sparked stories in more mainstream media, including Politico and The Daily Beast.

Haier Pence
Indiana Gov. Mike Pence, second from right, and Haier Group President Liang Haishan, far right, at the Evansville ribbon-cutting.

A year ago, Pence joined Haier executives at a ribbon-cutting ceremony for the Evansville center. The pro-trade America China Society of Indiana quoted Pence saying at the time: “When I met with Haier executives in China this spring, I was invigorated by the company’s plans to accelerate technology development in Indiana. In addition to our strong workforce and pro-growth business climate, Indiana has quickly become a center for innovation, making the Hoosier State the natural choice for this facility as Haier continues to increase its presence in the United States” (America China Society). GE Appliances employs 6,000 workers at Appliance Park in Louisville’s south end.

UPS: In Spring City, Tenn., a man was arrested and charged with drug trafficking after Rhea County Sheriff’s deputies caught him with 20 lbs. of marijuana he allegedly received via UPS from California. Sheriff’s investigator Charlie Jenkins said the man, George Robert Luttenberger Jr., told him he’d been getting pot from California since 2012 (Herald-News). In Brooklyn, a federal judge allowed the Equal Employment Opportunity Commission to proceed with a lawsuit accusing UPS of discriminating against male workers and job applicants who wore beards or long hair for religious reasons (Reuters).

PAPA JOHN’S fired a Denver employee who used a racial slur on a customer’s order slip and apologized to the teenager who placed the pizza order. “This action is inexcusable and doesn’t reflect our company values,” company spokesman Peter Collins told the Denver Post.

This was the second instance in less than a month where a Papa John’s employee was fired over an apparently racist order slip circulated on Twitter; the first one involved an Asian-American customer’s order at a Louisville restaurant near the end of June.

The Denver area restaurant is owned by Peyton Manning, the retired Denver Broncos quarterback who’s promoted Papa John’s in TV commercials. The teenager’s mother saw the order ticket and asked a community activist named Brother Jeff Fard for help (Denver Post). Yesterday, Fard sent a Tweet that included a possibly NSFW photo of the racial slur: Continue reading “BF starts distribution system in Spain; GE Appliances owner Haier dragged into GOP China politics; and Tenn. man arrested over 20 lbs. of marijuana allegedly shipped via UPS”