Mergers Leave St. Louis With Fewer Headquarters

Desiree J Hanford / Dow Jones Newswires 17jan01

ST. LOUIS -- This week it's Ralston Purina Group (RAL). Last week it was Trans World Airlines Inc. (TWA). Last year it was Mallinckrodt, Jones Pharma and Monsanto. Before that it was Jefferson Smurfit, McDonnell Douglas, Southwestern Bell, General Dynamics and Boatmans.

The number of corporate headquarters in St. Louis is dwindling. In Fortune magazine's latest ranking, St. Louis was tied for fourth place for the number of Fortune 500 companies headquartered there, said Dick Fleming, president and chief executive of the St. Louis Regional Chamber and Growth Association. The city is now likely fifth on that list, given recent mergers, Fleming said.

The region is home to 14 Fortune 1000 companies, excluding TWA and Ralston Purina, down from 20 companies in the last several months.

Despite shrinking numbers, business and civic leaders aren't sounding the alarms. What's happening in St. Louis is occurring all over the world, with companies that have their roots in a region being snapped up by a company located across the country or across the ocean. While area residents and civic boosters may not be happy about it, the trend is likely to continue as sectors consolidate and the big are purchased by the bigger.

"There's nothing in the water that makes St. Louis a bad place," said Tom Reeves, executive director of Downtown Now, a public-private partnership working to revitalize downtown St. Louis. "We're fertile ground for companies that started here and grew into successful businesses, and now they're attractive acquisition targets. What we need to recognize is that we're part of the national and international community. The boundaries have been broken."

There's little or nothing that the region and state can do to stem the loss of corporate headquarters since those decisions don't involve people outside of the merging companies, business and civic leaders said. While corporate headquarters add prestige to a region and have good-paying positions, other factors should also be considered when merger announcements are made, said Joe Driskill, director of the Missouri Department of Economic Development.

"A successful economy will have well-paying jobs, a high quality of life and a highly skilled and educated work force," he said. "(The loss of a corporate headquarters) is a blow to our collective egos, but economically it may mean more to us."

   Life Sciences, Communications Are The Future

Nestle S.A. (Z.NES), for example, plans to have its North American pet foods operations in St. Louis after its merger with Ralston and, according to a St. Louis mayoral spokesman, has agreed to continue investing in the southern portion of downtown where Ralston's headquarters are located. Nestle doesn't expect to eliminate any Ralston jobs.

In TWA's case, many business and civic leaders breathed a sigh of relief when American Airlines stepped forward to buy the financially struggling airline. American's stronger financial position, and its claim that St. Louis will be a major hub and that it will keep virtually all of TWA's employees, erased the uncertainty that swirled around TWA's future.

The companies that will lead St. Louis in the coming years will bear little resemblance to those of the region's past. St. Louis has seen its economic base move from shoe and apparel production to aircraft and auto manufacturing. Life sciences and communications companies are taking root, and the medical field continues to grow. Four of the area's 20 largest employers are in the medical field, according to the St. Louis Business Journal.

"We're getting into industries that we didn't even know existed 10 years ago," Reeves said. "We have to build on our strengths - we can't sell ourselves to everyone - and not just bank on the biggest corporation."

The fact that so many large companies based in St. Louis have merged with other businesses should be a wake-up call to the area's corporate and political leadership that efforts need to be combined and the word put out about what the area has to offer, Reeves said.

The focus for the future should be on high-wage jobs no matter whether they fall into the Old Economy or New Economy category, Driskill said. While the dot-coms and life science firms are having an impact on the region's and state's economy, so are the $25-an-hour jobs at Boeing Co. (BA), he said. "You need to have a balance," he added.

Whether people view all the corporate headquarters changes as positive or negative depends on your view, said John Roberts, executive director of Civic Progress, an organization that consists of 29 chief executives from the largest companies based in St. Louis. Instead of focusing on the headquarters that have been lost, he wants to see the region encourage companies such as privately held Enterprise Rent-A-Car and Charter Communications Inc. (CHTR) to grow and stay in St. Louis. Although he doesn't have any specific plans to do that, Roberts said business, civic and political leaders need to work together to make that happen.