Top 50: Pittsburgh's story could be 'The Departed'

Acquisitions take local companies off the list

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The publicly traded companies missing from this year's Top 50 extravaganza tell a story as interesting as that offered by the companies deserving of all this ink.

Six companies -- Mellon Financial, Duquesne Light, C-Cor, Wheeling-Pittsburgh, North Pittsburgh Systems and Blair Corp. -- dropped off the list because they were acquired or merged last year.

Two more companies will join the ranks of the departed next year: Medical equipment maker Respironics is being acquired by Royal Philips Electronics and IBT Bancorp of Irwin is being taken over by Indiana, Pa.'s S&T Bancorp. If shareholders of CNX Gas accept Consol Energy's offer for their shares and reverse a spinoff Consol engineered in 2006, a third company would drop off next year's Top 50.

And the night is still young.

With the dollar devalued and stocks slumping, who knows what buyers will follow the lead of Svenska Cellulosa, Royal Bank of Scotland, Bayer and other overseas companies that have purchased Pittsburgh concerns in recent years? Which small banks tarnished by credit concerns will be swallowed by larger regional players?

Because Pittsburgh's past is never far away, the ghosts of corporate headquarters past rush to mind. The loss of Gulf Oil, Westinghouse Electric, Rockwell International and National Steel, to name a few, dented civic pride and the economy. The most recent round of mergers and acquisitions may do the same.

"Losing headquarters is not very attractive," said Fariborz Ghadar, director of the Center for Global Business Studies at Penn State's Smeal College of Business.

"I think it's a negative, but it's not as negative as you would immediately think."

Diminished prestige is the least of the concerns that comes with losing a publicly traded company, according to Jay W. Sukits, who teaches finance at the University of Pittsburgh's Katz Graduate School of Business.

The biggest impact, Mr. Sukits says, is the loss of well-paying headquarters jobs. Then there's the vacant office space thrown on the market when an out-of-town acquirer depopulates the headquarters.

"I think that's been a problem in Pittsburgh for years," he said.

Finally, there's the economic fallout from not having as many business travelers dropping their expense account dollars in Pittsburgh, an impact felt by airlines, hotels, restaurants and the businesses that support them.

The downside is muted by the fact that losing a headquarters isn't as big a deal as it used to be because headquarters are smaller. The magnitude of the impact also depends on who is doing the acquiring and what motivates them. If a Pittsburgh company is being acquired because of its research and development capabilities, the region could benefit from additional capital invested by the new owner, Mr. Ghadar said.

In the long run, the demise of the Westinghouse conglomerate has been softened by the success of some of its former business units that remain, specifically the nuclear business. Westinghouse Electric broke ground on an 82-acre corporate campus in Cranberry last summer that will eventually be home to as many as 3,000 employees.

Similar prospects for growth have been promised by Bank of New York. When the company merged with Mellon Financial last year, it promised to create 1,000 to 2,000 news jobs here as a result of the merger. By the end of 2007, Bank of New York Mellon had created about 300 of them. This month, the bank announced plans to add 60 new wealth management positions.

Despite the hopeful start, the loss of Mellon's headquarters is a reminder that the public companies that remain here are not immune from the forces that have radically altered the city's corporate landscape. U.S. Steel and PNC Financial Services, occasional subjects of takeover speculation, come to mind. In the consolidation that has gripped their industries, U.S. Steel and PNC so far have been the hunters rather than the hunted.

Following up on earlier acquisitions in Eastern Europe, U.S. Steel spent more than $3 billion last year acquiring Lone Star Technologies, of Dallas, and Canadian steelmaker Stelco. It also announced plans to invest $1 billion at its Clairton plant. PNC Financial Services spent about $7 billion on three acquisitions last year, including the $6 billion purchase of Mercantile Bankshares, of Baltimore.

Such aggressive behavior by two of Pittsburgh's remaining corporate stalwarts should warm the hearts of the elected officials who look after the region's economic well-being. But they shouldn't overestimate the significance of keeping -- or losing -- corporate headquarters.

There are more fundamental factors determining the region's economic prospects than keeping a running tally of headquarters won and lost. Two of them are taxes and the region's aging infrastructure, according to Mr. Sukits.

Tom Nist, who holds the Donahue Chair in Investment Management at Duquesne University, said, "The question for our region has to be: How do we compete for jobs, not headquarters."

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Len Boselovic can be reached at or 412-263-1941.


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