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FAST
LANE -
March 2000
STATE
British Utility to Acquire LG&E Energy
LG&E Energy
Corp. announced it has signed a definitive merger agreement with PowerGen
plc, one of Britain’s leading utilities, in an all-cash transaction
valued at $3.2 billion.
LG&E Energy
will become the headquarters of PowerGen’s operations in the U.S.,
providing PowerGen with an entry into the U.S. energy market. LG&E
Energy and its subsidiaries, including Kentucky Utilities, will stay
the same and the company’s headquarters will remain in Louisville,
KY.
Under the terms
of the agreement, LG&E Energy shareholders will receive $24.85 in
cash for each share held. The purchase price represents a premium of
58 percent above the closing price of LG&E Energy shares on Feb.
25, 2000. The sale is subject to shareholder and government approval.
The combined company
will have assets of nearly $12 billion and total revenues of $8.7 billion.
"This transaction
provides tremendous value for our shareholders, customers, employees
and the Commonwealth of Kentucky, " said Roger W. Hale, LG&E
Energy chairman and chief executive officer. "It also preserves
LG&E Energy’s strong presence as a major corporation in the
state."
Speculation had
been brewing for more than a year that LG&E might be an acquisition
target because of an uncertain regulatory climate. That idea took on
added luster in January with a ruling by the Kentucky Public Service
Commission that the utility must abandon its proposed "performance-based
marketing" plan and instead reduce its rates for its 800,000 accounts
by more than $63 million.
Consequently, LG&E’s
public value had drifted down from about $26 a share to $16 in the past
12 months, leaving it vulnerable to a takeover.
STATE
Commonwealth Highly Visible in Rankings and Lists
KENTUCKY communities
and industries continue to show up prominently in national surveys and
rankings:
- In Site Selection
magazine, Kentucky ranked first in the country for new job creation
per one million population for the period from 1997 to 1999, and sixth
for new and expanded facilities. During 1999, 26,660 net new jobs
were created as 559 companies either located or expanded in the state,
pouring almost $2.5 billion into the economy. According to Greater
Louisville Inc., 51 of those companies invested over $387 million
and added 5,645 jobs in the Louisville area alone.
"Throughout
the 1990s, Kentucky has performed extremely well in bringing new
jobs and investment into the state," said the magazine’s
managing editor, Tim Venable. "For a small state, it is a fierce
competitor for both domestic and international investments."
- In January,
Forbes named UPS its company of the year, citing its recent $5.5 million
IPO, its huge investment in technology and its fastest-growing division
– the Louisville-based logistics operation.
- Comair was named
Regional Airline of the Year for 2000 by Air Transport World magazine,
the second time the carrier has been accorded that honor in the past
10 years.
- Prominent Kentucky
employers like General Electric (number one overall), UPS, Ford, Toyota
and Lexmark scored highly in Fortune’s annual list of America’s
Most Admired Companies. Meanwhile, Humana and Fruit of the Loom helped
to fill out the bottom of the list of 504 firms.
- In the latest
"Places Rated Almanac," Louisville ranks as the 14th-best
place to live out of 354 cities in the U.S. and Canada, while Lexington
comes in at number 50.
- A recent survey
by Cognetics named Louisville as the 12th-best place to start a company.
LOUISVILLE
Expanded Center Already Attracting Larger Events
FOLLOWING a $70
million expansion and remodeling, Louisville’s Commonwealth Convention
Center has been renamed the Kentucky International Convention Center.
Authorized by the
State Fair Board, which owns and operates the facility, the new name
reflects an increasing effort to market the center nationally and internationally
for conventions and trade shows. The redesigned facility now covers
two city blocks and offers almost 300,000 square feet of exhibit space
and a 30,000-square-foot ballroom.
The fair board
has announced that it has already booked 25 events for the expanded
center that could not have been accommodated in the original structure.
Ironically, the
new center might have major competition just two blocks away, a result
of a surprise announcement reviving talk of a 35,000-seat basketball
arena. J. Bruce Miller, an attorney who was an investor in the old Kentucky
Colonels of the American Basketball Association, reported to the Board
of Aldermen that an unnamed franchise in the National Basketball Association
has "expressed interest" in relocating to Louisville or some
other city. Furthermore, Miller said other unidentified corporations
had indicated a desire to pay from $1 million to $30 million to name
portions of the proposed arena.
Speculation on
the relocating team immediately focused on the Houston Rockets, and
on the other competing locations as Las Vegas and Nashville. The NBA
itself has made no announcement.
STATE
State’s Economy Growing – But So Is Wealth
Gap
KENTUCKY has grown
economically during the enduring national economic expansion but so
has the gap between the state’s wealthiest and poorest citizens,
according to a series of recent reports.
The state office
of Financial Management and Economic Analysis has reported that the
Gross State Product will continue to grow at an average of 2.5 percent
a year for the next three years and jobs will also expand at a rate
of 1.3 per cent annually. Both projections are slightly higher than
projected national averages and could result in average annual increases
in personal income of 2.1 per cent.
However, the report
prepared by economists at the University of Kentucky also cautions that
eventual job losses in manufacturing, mining, and farming could slow
further growth in future years unless the state can increase its development
of "knowledge-based" employment.
Furthermore, two
national think tanks, using U.S. Census data, have concluded that the
gap between the state’s income extremes is widening and will continue
to do so for the near future.
A joint report
by the center on Budget and Policy Priorities and the Economic Policy
Institute concluded that the poorest 20 percent of Kentucky’s families
earned an average of $11,365 a year during the period from 1996 throughout
1998, while the wealthiest 20 percent earned $125,797.
Thus, the top income-earner
received 11 times more income than their lowest-income counterparts,
a gap that increased from nine times more just a decade earlier.
The income gap,
calculated for all 50 states, showed New York with the greatest discrepancy
– at a multiple of 14.1 – and Utah with the least, at 7.1.
Kentucky ranked ninth overall, just ahead of neighbors Virginia, West
Virginia, Ohio and Illinois but substantially ahead of Indiana, which
ranked 49th. However, in this listing a lower state ranking indicates
homogeneity of the state’s income distribution.
STATE
Sykes’ Drop in Stock Price May Stall Plans for Kentucky
Expansion
FALLING share prices
of Sykes Enterprises, Inc. may adversely affect a planned headquarters
of its subsidiary in metropolitan Jefferson county.
Sykes, based in
Tampa, has seen its stock drop from about $49 a share to $15 in the
past month in an investor reaction to reports the company had misstated
previous earnings. The company is the parent of SHPS, which had announced
last spring that would build a new corporate headquarters in Anchorage
that would employ 2,900 highly-paid professionals.
SHPS administers
self-funded medical plans for large businesses and also operates call
centers for medical questions from plan participants. The company already
employs about 800 persons in Jeffersontown at the former Prudential
Service Bureau it acquired in 1998.
In announcing that
the company had to restate its earnings from previous quarters, a Sykes
spokesman admitted that the company may have to postpone its planned
Anchorage expansion. Furthermore, an additional announcement that Sykes
is now planning a major stock buyback to prop up its falling share value
also caused local analysts to conclude that the company may need to
sell the SHPS subsidiary to raise the cash necessary for the buyback
plan.
STATE
Louisville Investors Form Business Accelerator for High-Tech
Start-ups
SEVEN Louisville
investors, already prominent for their own entrepreneurial successes,
have created a "business accelerator" to encourage and profit
from high-tech start-ups.
The seven are investing
a total of $5 million in the for-profit venture, bCatalyst. It will
seek promising fledgling businesses and offer seed money, office and
logistical support, Internet access, personnel services, advice and
connections to long-term capital funding. The organization will charge
an on-going fee for these services and take an ownership interest in
the companies it selects. Similar for-profit accelerators are operating
in Palo Alto and Pasadena, California.
The founders of
bCatalyst are David Jones, Jr., co-founder of Humana, Inc.; Doug Cobb,
most recently chairman of Greater Louisville, Inc. and founder of The
Cobb Group; David Grissom, chairman of Mayfair Capital, a private investment
firm; Greg Fischer, founder of Iceberg Ventures; and Robert Saunders
and Keith Williams, most recently affiliated with Chrysalis Ventures,
Inc., along with Cobb and Jones.
Williams will be
the new company’s CEO and operations manager.
LOUISVILLE
Humana Veteran Michael McCallister Promoted to Chief
Executive Officer
MICHAEL McCallister,
a 26-year veteran with Humana Inc., has been named CEO by chair and
co-founder David Jones. McCallister succeeds Geoffrey Wolf, who resigned
abruptly in August following a continuing decline in reported earnings
per share for the health insurance company. Temporarily, McCallister
had been one of four executives in a newly-created "office of the
chairman."
Humana’s earnings
per share declined from 34 cents for the fourth quarter of 1998 to 15
cents for the same quarter last year. One encouraging sign, however,
was that the low 1999 report still exceeded analysts’ projections
of 11 cents per share.
In a continuing
effort to restructure the company, McCallister announced a decision
to sell the last remaining workers compensation unit services to its
management group. The new independent company will be based in Longwood,
Florida and serve 18,000 employers with 450,000 employees in 17 states.
Terms were not
announced but Humana will take a $120 million charge against earnings
for the sale of the marginal unit and two others announced previously.
STATE
National and State Economic Numbers Continue to Surge
EXPORTS rose by
$557 million to $82.9 billion in November, yet the U.S. trade deficit
grew to a record $26.5 billion. In January, national unemployment claims
fell by a dramatic 39,000 to a total of 272,000. For all of 1999, orders
for durable goods rose 7.1 percent, nearly doubling the 3.6 increase
in 1998. In 1999, the nation’s home ownership rate reached a record
high of 66.8 percent.
Kentucky recorded
its lowest jobless rate for any month in 22 years in December, as the
unemployment rate dipped to 3.6 percent. While holiday retail jobs headed
the list of gains with 5,300 new positions, manufacturing demonstrated
its health by adding 1,100 jobs. Meanwhile, state and local government
and education jobs dropped by 1,000.
At an economics
roundtable in January, UK economists predicted continuing low unemployment
for 2000, with the minimal job gains to come in retailing, business
services and health services. They expect wages to increase by 2.5 percent
over the next three years, but also expect an interest-rate increase
to slow housing starts by 7.5 percent.
Nevertheless, real
estate investment trusts are expected to yield a 10 percent to 12 percent
return.
STATE
Kentucky Tobacco Farmers See Quotas Cut by More Than
45 Percent
KENTUCKY tobacco
farmers stand to receive $123 million of the $328 million in federal
assistance now being distributed by the U.S. Department of Agriculture’s
Farm Service Agency. On the heels of last year’s quota cut, this
year’s quota has been cut again by 45.3 percent. As recently as
1997, there was a quota increase of 11.2 percent.
While many small
farmers are expected to go out of business, a 60 percent majority has
voted to allow cross-country leasing of quota, thereby keeping some
operations afloat. Tobacco imports rose 28 percent during the first
10 months of 1999 and the surplus pool has 320 million pounds more than
farmers would like.
While Philip Morris
will continue to participate in the current auction system, it has initiated
a burley pilot partnering program for the 2000 growing season, essentially
purchasing the entire tobacco crops of participating farmers for up
to three years.
LOUISVILLE
Churchill Downs Unveils New Logo to Reflect Broader Operations
CHURCHILL Downs,
Inc., no longer just one celebrated racetrack in Louisville, has unveiled
its new national logo to reflect the range of its gaming and racing
operations.
The new logo is
a stylized rendering of the famous twin spires – in gold for the
parent company, in green for the track itself and its four brethren
in Kentucky, Florida and California, and in blue for the Sports Spectrum
off-track parlors.
The abstract design
will also be used to identify Churchill Downs’ services that are
still on the horizon, especially CDSN, a simulcast television network,
and a Web-based magazine.
LOUISVILLE
PNCBank Completes Purchase of Citizens Plaza for $33
Million
PITTSBURG-based
PNC Bank Corp. has completed its purchase of the 29-story Citizens Plaza
building in Louisville for $33 million. The tower, completed in 1972,
was the first local example of "bankatecture." It will be
the headquarters for the bank’s Kentucky operations and renamed
PNC Plaza.
PNC is already
the anchor tenant of the tower, having acquired the lease for 12 floors
when it acquired the bank more than a decade ago. The structure had
been owned by Safeco Corp., a Seattle-based insurance and investment
company that had purchased the local real estate holdings of Winman
Corp.
Commercial Kentucky
has been retained to market the building, which will be remodeled. A
small underground parking garage may also be expanded. Major tenants
in addition to the bank are the Wyatt, Tarrant, and Combs law firm and
the Jefferson Club.
LOUISVILLE
PGA Announcement to Drop Valhalla Stuns Golf Community
IN a surprise move,
the Professional Golfers Association has dropped Valhalla Golf Club
as the site of its 2004 PGA Championship. The Louisville course’s
slot has been filled by a new club, Whistling Straits, located on the
shore of Lake Michigan in Wisconsin.
The announcement,
which was faxed to local media but not to local government officials,
angered many in the golfing community. Valhalla hosted the 1996 PGA
Championship and is planning to welcome the event again this August.
In response to the reaction, Jim Awtrey, executive director of the PGA,
paid a courtesy call on local officials to confirm that the 2000 event
will continue as scheduled and that there are no plans to relocate the
2007 Ryder Cup matches from the course in far Eastern Jefferson County.
The 1996 Championship
generated an estimated $40 million in economic activity. The impact
of the international Ryder Cup is expected to surpass that total significantly.
Business
Briefs
STATE
- The Bluegrass
State Skills Corporation has approved nearly $450,000 to fund 23 worker
training projects, affecting 1,677 workers across the state. Among
the organizations receiving the largest sums are SCA Hygiene Products
in Bowling Green, LaFarge Gypsum in Silver Grove, Wintech in Winchester
and the Carroll County Training Consortium.
- CSX Transportation
has announced that its work with Kentucky economic development officials
on 11 different projects in 1999 has helped to bring more than $227
million in investments and 617 new jobs to the state. Among the projects
was the $90 million Lafarge gypsum wallboard facility in Silver Grove
and the new $75 million Celotex plant in Carrollton.
- A Sierra Club
report entitled "Permitting Disaster in Kentucky and the Ohio
River Valley" says that the Army Corps of Engineers approved
nearly all wetland-destruction permits over a period from 1988 to
1996. The report drew a correlation between the amount of wetlands
destruction and the concomitant regional increase in flooding damage
and deaths.
- Charter Behavioral
Health Systems, in a national restructuring move, will close five
Indiana hospitals and one in Paducah, bringing its total number of
facilities to 37, down from 75 at this time last year. The Charter
Ridge operation in Lexington will remain open.
- The Kentucky
Community and Technical College System, one of eight national recipients,
has received a $300,000 grant from Microsoft in order to train information
technology specialists as part of the company’s "Working
Connections" program. The grant is part of an overall $7 million,
five-year program the software giant started in 1997 in collaboration
with the American Association of Community Colleges.
- Guaranty RV Center
in Oregon will pay more than $11,700 in auto taxes to the Kentucky
Revenue Cabinet as part of a plea agreement resulting from the firm’s
participation in a scheme to sell RVs to out-of-state customers without
their paying state registration fees and taxes. Overall, $1.6 million
will go to coffers in 21 states.
- Of 1,438 candidates
who sat for the Uniform CPA Exam in Kentucky last November, 166 passed.
Two of them – Amy Leigh Arens and Robin B. Jerauld – ranked
among the top 120 scores in the nation. Meanwhile, after 117 of 188
prospective circuit clerks failed the test to qualify for the position,
several legislators are questioning the fairness and timing of that
testing process. One of those who missed the mark has been on the
job in Greenup County for 20 years. Rep. Hoby Anderson of Flatwoods
plans to pursue a bill or amendment to change the system.
ASHLAND
- The Town Square
Bank, the homegrown result of a five -person partnership, opened in
February. The group made available 500,000 shares in order to build
the $5 million minimum capitalization necessary to get the institution
off the ground. The bank has 16 employees and an eight-member board.
BOWLING GREEN
- Equine industry
insiders have their eyes on Brad Kelley, president of the cigarette
manufacturing company Commonwealth Brands. Following his most recent
purchase in mid-January, Kelley now owns nine percent of the stock
in Churchill Downs. He partnered with the company in 1997 to buy the
Dueling Grounds track at a bankruptcy auction.
- Warren County
Fiscal Court approved $75 million in industrial bonds for Western
Kentucky University’s Student Life Foundation, to be used to
renovate residence halls and build more housing. In addition, the
city and county may partner with the university to build a new $40-50
million multipurpose arena off campus. Western is currently awaiting
a feasibility study weighing the choice between that proposal and
the renovation of its existing E.A. Diddle Arena on campus, constructed
in 1963. Meanwhile, the University has experienced a huge influx of
monetary gifts – $4.4 million over the past six months –
which is 68 percent above last year’s totals, bringing the total
endowment to $35.6 million.
CAMPBELLSVILLE
- Last March,
Campbellsville Apparel began production with 18 workers, all already
trained at the struggling Fruit of the Loom operation nearby. Today
the company employs 187 and hopes to hire 60 more. President David
Dickson said the company is finding a need in the marketplace for
quicker turnaround than the plethora of offshore operations can provide.
While filling orders for customers like the U.S. Army and Adidas,
the company aims to reach $7 million in sales.
CATLETTSBURG
- The Marathon
Ashland Petroleum refinery conferred early retirement benefits to
140 of its 1,100 workers, after offering the plan to about 400 employees
in November.
HEBRON
- Pomeroy Select
Integration Solutions, the IT services subsidiary of Pomeroy Computer
Resources, has formed Pomeroy College, a Web-based distance learning
tool designed to assist companies with their training programs. Clients
can enroll employees in over 250 self-paced, online courses, primarily
in programming and administering business software applications.
LEXINGTON
- The U.S. Immigration
and Naturalization Service has raided two offices and a home in a
crackdown on smuggling of illegal Eastern European workers through
bogus employment agencies in Florida and in Lexington. While some
of the individuals responsible for the fraud were arrested, many of
the illegal immigrants – most with jobs in the hotel industry
– have disappeared from the area. Low unemployment has forced
many employers to turn to such labor contractors to fill vacancies
on their staff.
- The William
R. Kenan Jr. Charitable Trust awarded a $1 million challenge grant
to Transylvania University, in support of faculty research and professional
development. The grant, the largest ever received by the school, will
be part of a $3 million endowment that will support summer projects
pursued by both faculty and students, sabbatical projects and a visiting
professorship.
- The Lexington-Fayette
Urban County Government has filed a suit against BellSouth to stop
its installation of fiber-optic cable on local right-of-way until
it agrees to pay to use that land. The city wants the lines to be
excavated and removed if the company balks at paying such a franchise
fee. The company claims protection from an 1886 law granting the company
a "perpetual statewide franchise" to run its phone lines
anywhere it pleased. While a challenge to that law by the City of
Louisville was defeated in 1912, government officials predict the
changing telecommunications landscape will bring about a different
result this time around.
- Keeneland Association
Inc. has purchased the 245-acre Kentucky Horse Center from Churchill
Downs Inc. for $5 million. The facility includes training tracks,
stables and an auditorium. Keeneland has meanwhile entered into a
partnership with The Blood-Horse to produce Keeneland magazine. Three
issues will be published, to coincide with the spring and fall meets
and with the July sales. The magazine will adopt a broader focus on
the Bluegrass lifestyle as well as presenting features and information
on Keeneland’s racing and sales.
- According to
a company spokesman, recent layoffs by Amazon.com will not be felt
at the company’s new facility in Campbellsville or its forthcoming
Lexington facility. Some 500 people now work at the Campbellsville
facility with up to 1,000 expected to be employed within two years.
The Lexington facility is expected to open soon with 250 workers.
LOUISVILLE
- Twenty-year
tenant FedEx has dedicated a new cargo facility at Louisville International
Airport, quadrupling its total space and adding 20 employees to its
work force. FedEx is now the airport’s largest land lease holder.
- Bakery Chef
Inc. – maker of such food items as frozen biscuits, waffles and
dry mixes – has acquired Community Baking of Chicago, a company
with $7 million in annual sales of muffins and pound cake.
- Rhodes Machinery
International Inc., a conveyor and sheet metal manufacturer, will
open its fourth location in Sellersburg, Indiana. The company already
operates plants in Louisville and Henderson and is planning to grow
by 12 percent over each of the next few years.
MIDDLETOWN
- Commonwealth
Bank & Trust will merge with Shelby County Trust Bank this spring
under the name Commonwealth Bancshares Inc. Louisville investment
manager Darrell Wells holds a controlling interest in both banks,
whose combined bank assets will total $434 million under the new holding
company arrangement.
MORGANFIELD
- Coal miners
at Peabody Group’s Camp No. 1 mine ratified a contract that will
reduce benefits, overtime and vacation days, all in an effort to stay
the mine’s closing and possibly pave the way for the opening
of another mine nearby. The company’s Camp No. 11 mine in the
same area – which employs 230 – is still expected to close
in late 2002.
NORTHERN KENTUCKY
- Ashland Inc.
reported a net income of $37 million in the fourth quarter, a 20 percent
drop from the same period of fiscal 1999. Earnings at wholly-owned
subsidiaries grew by 17 percent to $92 million, fueled primarily by
the performance of the APAC paving and construction unit, which has
gobbled up 30 competitors in the last three years through outright
purchases. Ashland’s performance continues to be hampered by
its 58 percent ownership of Arch Coal (producing a $3 million loss)
and by high crude oil prices.
- Covington-based
Regent Communications saw its shares rise 41 percent on its first
day of trading in late January.
- The Bank of
Kentucky Financial Corp. has bought Fort Thomas Financial Corp. in
a stock exchange valued at $27.5 million.
OWENSBORO
- Area Bancshares
completed its acquisition of Peoples Bank of Murray, Dees Bank of
Hazel, Bank of Livingston County (in Tiline) and Bank of Lyon County
(Eddyville) for a purchase price of $77.75 million. The combined assets
of the four banks total approximately $376 million. Area is now the
largest Kentucky-based bank holding company, with assets of $2.7 billion
and 17 subsidiaries.
- Swedish Match
is purchasing four tobacco brands and their inventories from National
Tobacco Company for $165 million, shifting the production of Beech-nut,
Durango, Trophy and Havana Blossom from Louisville to the Stockholm-based
company’s Owensboro plant. The deal will add 20 jobs to the Owensboro
plant’s payroll and production is expected to increase by 40
percent. The Owensboro plant produces RedMan, the nation’s leading
brand of chewing tobacco.
- The eight-year-old
International Bluegrass Music Museum has closed in order to undergo
a $3 million renovation project. It is scheduled to re-open in May
2001, complete with life-sized replicas of Bill Monroe and his Bluegrass
Boys, live performances, and interactive exhibits. Museum officials
hope the facelift will bring in even more than the 5,000 visitors
in 1999.
PADUCAH
- After laying
off 250 workers each at gaseous diffusion plants in Piketon, Ohio
and Paducah last year, U.S. Enrichment Corp. will lay off an additional
850 workers at the two plants this year, thereby saving itself $39
million in production costs. Prices for enriched uranium, used to
fuel nuclear power plants, have been falling steadily. Meanwhile,
digging has uncovered radioactive materials near the plant in Paducah,
and a draft report from the U.S. Department of Energy reveals that
the plant conducted experiments with radioactivity on a number of
its workers in the 1950s, only some of whom had volunteered for the
duty. In a story reported by the Louisville Courier-Journal, other
problems over the years that are detailed in the report include venting
of contaminated steam and smoke in secret "midnight negatives"
and extremely high radiation exposure of workers at a feed mill at
the plant.
PRESTONSBURG
- Citizens National
Corporation, which operates 11 banks in the Big Sandy region, has
sold the Bank Josephine building for less than its appraised value
to the Floyd County Board of Education. Citizens National CEO Dennis
T. Dorton said, "We hope to preserve the historical and architectural
value of this building, while helping to improve education in the
Big Sandy region."
SOMERSET
- Bunny’s
Moving and Storage Inc., in Danville since 1967, has acquired two
moving and storage operations in Somerset and will relocate its headquarters
there.
WINCHESTER
- In what officials
are calling one of the worst spills ever in Kentucky, several hundred
thousand gallons of crude oil spilled into fractured bedrock in Clark
County in late January, triggering emergency cleanup efforts by 250
workers to prevent the oil from contaminating groundwater or seeping
into the Kentucky River. The leak occurred when a Marathon Ashland
Petroleum pipeline burst underneath the fifth hole at the Southwind
Golf Course. Several springs and wells were thought to be contaminated,
and over 1,700 cubic yards of soil had to be removed.
- Wintech received
three quality awards from Nissan Motor Manufacturing, including the
company’s highest honor, the Quality Achievement Award. The award
is bestowed on only the top five of Nissan’s 330 suppliers to
its Smyrna, Tennessee plant.
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