Tag: Deals

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UnitedHealthcare protests $40.5B Humana contract; Roadhouse dives 12% on Q2 report; Trump eats KFC with metal utensils — Internet howls; and Taco Bell workers in Calif. gone after cop-taunting report

A news summary focused on 10 big employers; updated 5:09 p.m.

HUMANA: UnitedHealthcare has filed a formal protest against a Defense Department decision to award the next round of Tricare contracts to Humana and another competitor. The Pentagon selected Humana Government Business to manage the brand new East region, a consolidation of the North and South regions, in a contract worth as much as $40.5 billion. Health Net Federal Services got the West region contract. Humana manages the current South region and Health Net the North (Military Times).

Humana and Aetna logos 250Also, Humana and Aetna announced this morning a deal to sell some of their Medicare Advantage assets to Molina Healthcare for $117 million in cash, in the health insurers’ latest effort to win Justice Department approval for their proposed $37 billion merger. The transactions are subject to the successful completion of the merger, plus approvals from regulators. Under the deal, Molina would get about 290,000 Medicare Advantage members in 21 states, the two companies said, “preserving robust competition for seniors choosing to receive Medicare coverage through Medicare Advantage plans and addressing a key concern of the U.S. Department of Justice in its challenge to the Aetna-Humana transaction” (press release). Today’s announcement followed a July 21 DOJ lawsuit against the two companies to block their tie-up over fears it would be anticompetitive and raise consumer prices.

Aetna, meanwhile, reported better-than-expected second-quarter results this morning, in a report where it also became the last of the five major national health insurers to project a loss on Affordable Care Act plans for 2016. The Hartford-based insurer said it would re-evaluate its participation in the business and cancel a planned expansion. It also said it was setting up a $65 million reserve to account for expected losses on individual plans over the rest of this year (Wall Street Journal).

Kent Taylor
Taylor

TEXAS ROADHOUSE shares fell sharply, closing at $41.80, down 12.4%, or $5.90, after the Louisville-based steakhouse chain reported disappointing second-quarter results yesterday after stock markets had already closed (Google Finance). Founder and CEO Kent Taylor discussed the results with Wall Street analysts in a transcript (Seeking Alpha). The chain has nearly 500 company-owned and franchised restaurants in 49 states plus five foreign countries with 48,000 employees. About 500 of those workers are in Louisville; more about Texas Roadhouse.

FORD said total truck sales, including pickups and vans, grew 5% in July versus a year ago with 87,104 sold. Overall company U.S. sales were down 3%, with 216,479 total vehicles sold (press release). Shares closed at $11.94, down 4.3%, or 53 cents (Google Finance). Ford’s Kentucky Truck Factory employs about 5,100 workers, producing F-250 and F-550 Super Duty pickups, plus Expeditions, and Lincoln Navigators.

KFC: The World Wide Web is chowing down on a photo of GOP White House nominee Donald Trump eating a KFC meal last night aboard his gold-plated private jet, using real cutlery (as opposed to the plastic utensils most everyone else uses or, let’s be clear, hands). Trump tweeted a photo of the moment near 10:30 p.m.; see Tweet, above. “It’s tiny finger lickin’ good,” wrote the New York Daily News, which then went on to quote one Twitter user saying: “Eating KFC with a fork and knife is like eating a candy bar with chopsticks.”

Britain’s Telegraph was even more over-the-top pretend aghast: “What kind of madman — what kind of abominable lizard in an orange human skin suit, a Sunny Delight scare story incarnate — would eat a biscuit with a knife and fork? The same madman who was last night pictured eating a bucket of KFC with a knife and fork, that’s who.” And then there was the whole KFC vs. Popeyes vs. Bojangles’ contretemps (Daily News, Telegraph and Daily Caller). Here’s yet more news coverage — plus, all the Twitter reaction.

TACO BELL: In California, several employees in northwest Bakersfield no longer work at a Taco Bell there after reports they had taunted a local police officer last week, according to the manager of the outlet. A customer had told a local TV station he could hear the employees making “oink oink” sounds and laughing while the officer was ordering. The manager said the employees no longer work there; he could not say how many employees were involved (Kern Golden Empire).

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Roadhouse whiffs Q2 sales, and shares plunge 8%; McD done with antibiotics-fed chicken; Kindred closes $39M Arkansas deal; and Pizza Hut workers in S.C. score $50 touchdown

A news summary focused on 10 big employers; updated 8:11 p.m.

TEXAS ROADHOUSE said today it missed second-quarter revenue estimates, and also disclosed that same-store sales in the current quarter had slowed vs. Q2. The results were released after markets closed. In after-hours trading, shares tumbled 7.9% to $43.94. The Louisville-based steakhouse chain said earnings were 47 cents per share on revenue of $508.8 million. Wall Street had forecast EPS of 45 cents and $509.8 million in revenue (Investors Business Daily and press release). Today’s report came less than a week after several analysts downgraded Roadhouse’s stock, sending shares down 6%.

KFC bucket of chickenKFC: Raising pressure on KFC to follow suit, McDonald’s said today it’s completely stopped buying chickens raised with antibiotics meant for humans, a step completed months ahead of schedule. The chain previously estimated the change would be completed by March 2017 (CNBC). The longtime KFC critic on the issue, the Natural Resources Defense Council, reiterated its call for the Yum unit to stop buying from chicken suppliers using antibiotics. “KFC,” the group said today, “stands out as the signature chicken purveyor that is far behind” (NRDC).

KINDRED and the Arkansas Department of Health said they had completed a previously announced agreement for the Louisville hospital and nursing company to buy the state agency’s in-home health care operations for about $39 million. The deal includes licenses to provide home health, hospice and personal care services throughout the state. Kindred won the award through a bidding process (press release).

AMAZON shares shot up to a new record high today — $770.50, up 1.5% — before closing lower at $767.74. The retailer’s stock is now up 43% from a year ago vs. a much smaller 3% for the broader S&P 500 index (Google Finance). Amazon employs 6,000 workers in the Louisville area at mammoth distribution centers in Jeffersonville, and in Bullitt County’s Shepherdsville. (More about Amazon.)

Ford DAV car
One of the newest DAV vans.

FORD received a city building permit today to proceed with $14 million of planned improvements at its Kentucky Truck Plant on Chamberlain Lane (Courier-Journal). Also today, the automaker said it donated another eight vans to the DAV Transportation Network, a volunteer group that takes ill and disabled veterans to VA medical centers across the country. The automaker said today it has now given 207 vehicles to the group over the past 20 years; the program dates back 94 years to when founder Henry Ford provided Model Ts as transportation for disabled vets (press release). In Louisville, Ford employs nearly 10,000 at its truck and vehicle assembly factories; more about its local operations.

Cam Newton
Newton

PIZZA HUT employees in Spartanburg, S.C., didn’t learn the mysterious customer in black who showed up 15 minutes after closing time for a cheese pizza was Carolina Panthers quarterback Cam Newton until after he’d driven away. But he did leave a big tip last Thursday, paying $50 for the pie. “It definitely came in handy,” manager Amanda McCluney told WCNC, “because I was actually short $50 because I’m moving and I needed that to go towards my U-Haul and my storage unit” (WCNC).

In other news, U.S. Senator Mitch McConnell said there’s a “great likelihood” that he’ll seek a seventh term in 2020. “I’m at the top of my game,” McConnell, 74, told WKYT in Lexington. “I think I’ve been effective in serving our people, and there’s a great likelihood I’ll run again” (Associated Press via ABC). In office since 1985, the Republican is Kentucky’s longest-serving U.S. senator (Wikipedia).

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Texas Roadhouse rage: As chains race to douse social media wildfire, chain fires waitress for ‘kill Mexicans’ Tweet

A news summary focused on 10 big employers; updated 12:02 p.m.

TEXAS ROADHOUSE fired a waitress in Greeley, Colo., this week after she tweeted a threat to kill Mexicans, in a flash of roadhouse rage because a customer didn’t tip her. Texas Roadhouse spokesman Travis Doster told ABC 7 News: “Our managing partner was actually mowing his lawn when he was alerted. He immediately rushed to the restaurant, met with the employee who posted this disgusting Tweet, and she was terminated.”

Former waitress Megan Olson, who goes by the name Megatron on Twitter, wrote: “If we had a real life purge I would kill as many Mexicans as I could in one night. #learnhowtotipyoufuckingtwats.” ABC 7 showed an edited photo of the Tweet; photo, top.

Olson later apologized on Facebook: “I wrote hurtful, inconsiderate, insensitive and careless words and I understand the amount of people I have offended by that. There are no excuses for what I have done. . . . I want you all to know that I do not actually feel this way.” Her Twitter account is now password-protected. (ABC 7 News)

A Facebook user reported Olson’s Tweet on the Louisville-based restaurant chain’s Facebook page Thursday, and the company responded immediately, illustrating once more how quickly companies try to extinguish bad news before it goes viral on social media.

The Texas Roadhouse case was the fourth time in less than a month where Louisville fast-food chains were attacked for employees’ discriminatory behavior. There was last Saturday’s much-discussed Taco Bell employee in Phenix City, Ala., who refused to serve two uniformed sheriff’s deputies (story, below), and two Papa John’s restaurants where employees used racial slurs on order slips, in Denver last week, and in Louisville at the end of June.

Meachem and Moore
Meachem and Moore

TACO BELL: In Alabama, dozens of residents gathered Continue reading “Texas Roadhouse rage: As chains race to douse social media wildfire, chain fires waitress for ‘kill Mexicans’ Tweet” →

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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.

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Humana, Aetna reportedly still talking with DOJ to overcome deal opposition; Papa John’s sued over IT exec it poached from Panera Bread

A news summary focused on 10 big employers; updated 5:59 p.m.

HUMANA and Aetna remained in discussions with the Department of Justice today, trying to convince antitrust regulators their $37 billion merger will be good for seniors in the Medicare Advantage market, CNBC is now reporting.

Humana logoBut the two insurance giants are prepared to fight in court if their deal is blocked, a move DOJ antitrust regulators could take within just days, according to the business news cable channel, which is citing people familiar with the discussions who spoke on condition of anonymity because of the sensitive nature of the negotiations. “The insurers have offered up divestitures and secured buyers,” according to CNBC, “with contracts ready to be signed, for assets in local markets where their coverage overlaps, according to one source. But so far, the DOJ has not been convinced by the offer” (CNBC).

Aetna logoReflecting renewed investor optimism, Humana shares climbed 3% today, closing at $158.41 a share, up $4.77; shares had fallen 10% yesterday on initial reports the DOJ was moving to block the deal. Aetna’s stock rose 1.2%, to $116.49 (Google Finance).

To secure shareholder approval of the deal, Humana’s proxy solicitor, D.F. King & Co., made more than 40,000 phone calls to individual investors last fall (Wall Street Journal).

PAPA JOHN’S: Panera Bread Co. has filed a lawsuit claiming a former technology executive who left to work for Papa John’s took trade secrets with him. The suit filed yesterday in U.S. District Court in St. Louis against Papa John’s and the executive, Michael Nettles, says he worked four years as a vice president in Panera’s IT department, with access to highly sensitive trade secrets, and that his move to Papa John’s violates a confidentiality and non-compete agreement. Nettles joined Papa John’s on Monday. Panera is based in suburban St. Louis (Post-Dispatch).

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Analysts: Papa John’s outlook brighter amid civil unrest; Humana stock edges up after DOJ shocker; and Louisville’s big on $1,500 apartments

A news summary focused on 10 big employers; updated 10:39 a.m.

Papa John's vs. S&P July 20
Papa John’s stock, in blue, has zoomed ahead of the S&P 500 index over the past three months, when civil unrest has been in the news.

PAPA JOHN’S stock jumped 3.7% to $71.69 a share in the first hour of trading, after Wall Street analysts upgraded the Louisville pizza chain on the surprising view that diners, concerned about political and civil unrest, are choosing to stay home for pizza delivery rather than go out for a meal. “After speaking with several large operators and industry contacts,” KeyBanc Capital Markets analysts said yesterday, “we believe the recent decline in casual dining restaurant segment fundamentals — traffic down 3% to 5% the past several weeks — may be the result of consumers eating more at home amid the current political/social backdrop, which we believe could last through the November election.” The company’s stock has jumped 22% in the last three months vs. a much smaller 3% gain in the broader S&P 500 index (MarketWatch and Google Finance). Louisville-based Papa John’s employs 750 workers at its headquarters, and another 21,000 across the globe. More about the company.

HUMANA‘s stock rose 74 cents to $154.12 a share a day after word surfaced the Justice Department was poised to block the Louisville insurer’s $37 billion acquisition by Aetna of Hartford. Aetna climbed 74 cents to $115.84. Yesterday, Humana tumbled 4%, and Aetna fell 2.7% (Google Finance). Humana employs 12,500 workers in its Louisville corporate hometown.

KFC: In New Zealand, franchisee Restaurant Brands hasn’t ruled out home delivery of KFC now that McDonald’s has started offering the service. But CEO Russel Creedy said KFC had tried home delivery before and found customers preferred drive-throughs rather than waiting for their chicken to be brought to their front door. Creedy’s franchise already has experience with delivery through its Pizza Hut restaurants (New Zealand Herald).

FORD‘s Flat Rock Assembly Plant south of Detroit — where the popular Mustang and Fusion are built –- caught fire around 7 last night and forced a partial evacuation of the sprawling 400-acre complex that employs 3,200 workers. No injuries were reported (Detroit Free Press). In Louisville, Ford employs nearly 10,000 workers at two vehicle and truck assembly factories.

Amazon logoAMAZON is signing up amateur drivers in the U.K. to deliver packages in their spare time from distribution centers to customers’ homes, expanding a system it started last year in its corporate hometown of Seattle. Starting this month in Birmingham, a smartphone app will allow the company’s part-time mules to choose when and where they want to work, as well as guiding them to customers’ homes and allowing customers to track their orders (Financial Times).

PIZZA HUT: With the Aug. 5 start of the Summer Olympics closing in, Pizza Hut has launched its patriot-themed Big Flavor Dipper in a red-white-and-blue box emblazoned with “Go USA!”

In other news, Louisville ranked No. 6 among 30 U.S. cities offering the biggest apartments renting for $1,500 a month, according to a new Rent Cafe report. The top 10:

  1. Memphis: 1,948 square feet
  2. Oklahoma City: 1,786
  3. Indianapolis: 1,724
  4. El Paso: 1,667
  5. Columbus, Ohio: 1,667
  6. Louisville: 1,648
  7. Jacksonville, Fla.: 1,579
  8. Las Vegas: 1,546
  9. Phoenix: 1,415
  10. Fort Worth: 1,389

In contrast, New York City had the smallest apartments, at 271 square feet (MarketWatch and Rent Cafe).