Despite the complexities of the nation’s worst economic downturn in decades, some Louisiana-based companies are showing surprising growth.
The state recently has seen its count of homegrown Fortune 500 companies sprout to three: power provider Entergy Corp., engineering-construction company The Shaw Group Inc. and CenturyLink, the former CenturyTel Inc. that joined the list last summer with a canary-swallowing-the cat buyout of Embarq Corp.
Though it hasn’t reached the Fortune list, Iberiabank Corp., largely limited to Louisiana in recent years, has stirred waves with takeovers of failed banks in Florida and Alabama, enlarging its footprint to six Southern states.
Modest by business expectations of many other states, the growth of these companies is still welcome news that contrasts to the earlier exodus of Louisiana-headquartered big businesses or their disappearance into the black hole of mergers. Among the lost: banker First Commerce Corp., petroleum explorer Louisiana Land & Exploration Co., mining giant Freeport McMoRan Copper & Gold Inc. and offshore fabricator McDermott International Inc.
Monroe-based CenturyTel paid $5.8 billion in stock and took on $5.8 billion in debt to nab the larger Embarq and, overnight, become the nation’s fourth-largest standard telecommunications provider. Baton Rouge-based Shaw, not long ago a pipe fabrication outfit, has expanded its swath to nuclear energy, defense contracts, power plant construction and post-disaster construction and engineering.
At first glance, Lafayette-based Iberiabank’s charge into Florida – a state riddled with real estate loan problems – may seem curious. But industry analysts say it’s simply a case of opportunity knocking with a good deal at low risk to shareholders.
Here’s what Iberiabank is trying to take advantage of: many small banks in Florida are in trouble and U.S. megabanks, with more than a few recent problems of their own, have cut back their loan exposure in the state. Thus, the field has been opened for mid-size banking companies with capital. The Federal Deposit Insurance Corp. is taking most of the risk and cleaning out much of the rubble. A buyer has the opportunity to get the cream when the economy recovers, analysts say.
Two recent stock offerings have given Iberiabank $273.5 million to make future moves – something analysts say they expect the company to do once it gets settled in Florida.
Perhaps mindful of the fact that Embarq had been headquartered near the Kansas City commercial hub, the administration of Gov. Bobby Jindal cut a deal to keep CenturyLink in Louisiana through at least 2019, while creating 350 new jobs over the next four years at an average salary of $45,000.
CenturyLink will receive performance-based grants of up to $5 million over four years for personnel relocation costs and up to $600,000 over two years to defray air transportation expenses resulting from the Embarq acquisition. The state also will kick in $900,000 for CenturyLink and Louisiana Tech University to design advanced education programs for CenturyLink employees.
The state had a $210 million deal with Shaw Group to keep its headquarters in Baton Rouge and build a nuclear reactor components plant in Lake Charles that would employ 1,400. But the company canceled the agreement last summer, saying the state needed that money to help balance its precarious budget. Shaw says it still intends to remain in Baton Rouge and build the plant.
In the meantime, Shaw ended its most-recent fiscal year with a contract backlog of $22.7 billion, up 46 percent from the previous year.
The concept of taxpayer-funded incentives for profitable corporations has always been controversial. But it’s a competitive game played by other states, and Louisiana’s long-term track record of fending off their raids has not been especially good.
During the 1990s, Louisiana tried another way of taking care of its big businesses: largely ignore them while pushing forward with casino gambling and touting tourism as the way to a prosperous future. That, history clearly shows, didn’t work.
Alan Sayre is the New Orleans-based business writer for the Associated Press.
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