One of the great business success stories of the past three decades has been Anthem Inc., which easily could have been gobbled up as the health insurance industry consolidated but instead became one of its most aggressive acquirers.
It takes sharp business skills and more than a little audacity to pull off deals like the $16.5 billion purchase of California-based WellPoint Health Networks Inc. in 2004. WellPoint, after all, was the larger company, but Indy got the headquarters, anyway.
That was in no small part because Anthem brass cared deeply about the community and wasn’t willing to bargain away the headquarters location to close a deal. As retired Anthem executive David Frick, a former deputy mayor under Bill Hudnut, put it last month, “Those of us who built the company were really hoping to build a big company here in Indianapolis.”
All that history seems suddenly relevant as Anthem struggles to seal its biggest deal ever, the $47 billion buyout of Connecticut-based Cigna Corp. Though analysts and other industry observers universally say the merger makes sense, negotiations have bogged down over a host of “soft” issues, including whether Cigna CEO David Cordani will get to slide into the CEO’s seat.
The executive suite and boardroom of today’s Anthem do not have the deep Hoosier roots that were present in Frick’s day. But we hope they respect that legacy and are equally reticent to bargain away a headquarters. After all, Anthem, which employs 4,900 people in Indianapolis, is one of just five Fortune 500 companies in the state, ranking 38th.
Business purists might argue that board members and executives should be almost exclusively focused on shareholder value. But we think the state ultimately benefits from a broader mind-set.
Few places make our case more convincingly than Columbus, Indiana, once home to the twin corporate behemoths of Cummins Inc. and Arvin Industries.
Cummins, No. 154 on the Fortune 500, continues to be an economic and civic force throughout central Indiana. Arvin, on the other hand, combined with Michigan-based Meritor Automotive Inc. in 2000 in a $7.5 billion “merger of equals” that proved anything but.
The combined company’s headquarters landed in Michigan, while Indiana got the virtually meaningless distinction of being the state of incorporation. ArvinMeritor ended up shedding south-central Indiana jobs by the thousands, and a Columbus economic development official later called the deal a “disaster” for the city.
The good news is that Indiana law emboldens boards to take a bigger-picture view—thanks, ironically, to none other than Arvin.
In the mid-1980s, as corporate raiders were circling, Arvin swayed the General Assembly to pass an anti-takeover measure that gives boards unusually broad authority to do as they see fit—including factoring in issues such as impact on the community.
As Arvin’s ultimate unraveling demonstrates, the nitty-gritty details of a deal can make all the difference in how a community fares. We implore Anthem’s board not to lose sight of that reality as it chases what would be the largest merger in Indiana history.•
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