Future of Rhode Island’s Economy is Now in the Hands of Wall Street

Tuesday, November 14, 2017
GoLocalProv Business Team

Three of Rhode Island’s highest-profile companies are at the epicenter of big moves on Wall Street. The implications of mergers, acquisitions, and downsizing may be profound for Rhode Island.

The players are CVS, Hasbro and General Electric — combined the three companies employ over 400,000 globally. 

CVS on Fast Track

First, a CVS merger with America's third-largest health insurer, Aetna, is being classified as a smart effort by CVS to ward off Amazon’s effort to disrupt the pharmacy industry.

“CVS Health Corp and health insurer Aetna are working toward finalizing merger terms and announcing a deal for more than $70 billion as early as December, according to people familiar with the matter,” reported CNBC on Monday.

Even if the deal is finalized in 2017, the federal regulatory review will continue into 2018.

SEE Saul Kaplan of Business Innovation Factory Discuss All Three Potential Blockbusters Below

For Rhode Island, the stakes are high. Today, CVS is Rhode Island’s largest for-profit employer and it's not close. CVS employs a reported 7,500 in Rhode Island.

CVS CEO Larry Merlo
The acquisition by CVS of Aetna is expected to cost more than $70 billion. The location of headquarters of the merged healthcare giant could remain in Woonsocket, but in June Aetna announced they were moving its corporate operations out of its 140-year-old home of Hartford, CT and relocating it to New York City. The first step in the relocation of Aetna was to be 250 top corporate staffers and 6,000 corporate workers would continue in Hartford in the short-term.

As GoLocal reported in October, a combined CVS and Aetna company would be the second largest revenue company in the United States — at $240 billion — ahead of Apple ($215B) and Berkshire Hathaway ($223B). The only company in America doing more revenue would be Walmart ($485B).

Hasbro and Mattel — Game Changer

On Friday, the Wall Street Journal reported that Pawtucket-based Hasbro is looking to acquire Mattel -- and both stocks got a boost on Monday. Mattel was up 20 percent and Hasbro was up nearly 6 percent.

If the deal moves forward, it, too, will face anti-trust review by the U.S. government as Mattel and Hasbro are the first and second largest toy companies in the United States. In 2016, Mattel generated $5.46 billion in revenue and Hasbro $5.01 billion. The two companies have been rivals for decades. In the 1990s Mattel tried to consume Hasbro, but an unprecedented move by Rhode Island's legislature assisted the Hassenfeld-led Hasbro to fight off Mattel's bid.

Hasbro

In recent years, Hasbro has been the more profitable and have leveraged its success in gaming and entertainment. For Rhode Island, the implications could be significant. As GoLocal exclusively reported, Hasbro is looking to consolidate its 1,500 plus Rhode Island employees presently located at the headquarters in Pawtucket, the East Providence facility and downtown Providence -- ideally into one creative campus in downtown. One potential location under consideration is the vacant Superman Building.

But, a Mattel acquisition could spark Hasbro to reconsider which coast -- east or west -- is best for an entertainment-focused company.

General Electric

On Monday, General Electric announced a major business restructuring. The GE Board of Directors announced a 50 percent cut to the current quarterly dividend of $.24 a share. This change will be effective beginning with the Board’s next dividend declaration, which is expected to occur in December.  It is one of the largest dividend cuts in American business history.
 
“We understand the importance of this decision to our shareowners and we have not made it lightly.  We are focused on driving total shareholder return and believe this is the right decision to align our dividend payout to cash flow generation," said John Flannery, Chairman and CEO of GE. The company announced a number of elements of the restructuring of the underperforming company. GE's stock plummeted on the news over 7 percent and closed at an anemic $19.02 per share.

The implication for Rhode Island is unknown -- GE had announced last winter that they would be opening a digital office in Rhode Island in exchange for $5 million in taxpayer subsidies. 

Reuters reported Monday:

GE’s Digital unit, on which Immelt bet billions of dollars, would focus on selling apps to customers in its core businesses, Flannery said. He confirmed that the shift meant sales staff were being let go, as Reuters reported last week.

GE also will cut spending on the digital unit to $1.1 billion in 2018 from $1.5 billion in 2017. GE had previously said it would invest $2.1 billion in its digital unit in 2017, but that tally included money not tied to Predix, GE’s industrial-internet platform, GE said.

GoLocal reached it to GE's spokesperson for the digital division and who said in an email, "We do not have anything to add beyond what was said in the investor meeting today." Listen to the investor call HERE.

See Saul Kaplan discuss CVS, Hasbro, and GE on Business Monday on GoLocal LIVE.

Big opportunity and Big Risk

For Rhode Island, decisions made in boardrooms in Woonsocket, Pawtucket, and Boston could mean one of the greatest periods of growth for Rhode Island in decades. CVS and Hasbro combined -- if their deals are completed -- could literally add tens of thousands of jobs to Rhode Island. Or, the two companies could move headquarters to New York and Los Angeles and devastate the state's morale and economy.

  • The Original GI Joe

    In 1964, Hasbro's factory in Pawtucket released the first ever action figure--they called it "G.I. Joe: America's Moveable Fighting Man." 

     
  • The Original Lineup

    The original prototypes for Hasbro's action figure include a sailor ("Skip), a marine ("Rocky"), and a pilot ("Ace"), but it was Joe who stole America's heart. The idea of Joe as part of a team would resurface decades later. 

     
  • G.I. Joe Ages Gracefully

    In the 1970s, America and G.I. Joe both saw big changes. Joe got hip with some realistic facial stubble, and added new moves to his arsenal with the "kung fu grip"--an innovation from Britain that allowed for Joe to grip objects. 

     
  • New Characters

    This was the decade that saw Joe joined by a host of other related characters (including Atomic Man, seen here). Joe was now part of a unit--and would continue to be throughout the franchise's history. 

     
  • Joe in the 1980s

    In the 1980s, G.I. Joe launched G.I. Joe: A Real American Hero, immortalized in various media. Getting in line once more with the mood of the buying public, Joe was cleanshaven again, with even more innovations to the action figure. 

     
  • Joe in Comics

    Joe has been a hallmark of a variety of media, but his comic book incarnation is among the most beloved. He has existed in comics in one form or another since the 1940s, decade before the action figure was even manufactured. Here's a shot from a later story, based off the Real American Hero series from the 1980s. 

     
  • Joe Moves into the 90s

    In the 1990s, the G.I. Joe franchise continued to adapt and expand. Joe was outfitted with Desert Storm-style cameo for the Target Exclusive Duke action figure, seen here. 

     
  • Joe in the 2000s

    In the 2000s, Joe made the leap into his first blockbuster, with the character title of G.I. Joe: The Rise of Cobra played by emerging star Channing Tatum. The movie spawned a video game adaptation and grossed over $300 million worldwide. 

     
  • The 2010s

    In the past few years, Joe has continued on his upwards trajectory. A sequel to the 2009 movie, G.I. Joe: Retaliation, grossed $375 million worldwide. Talks of a third movie by the same director are already in the mix. 

     

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