More Private, Less Public

M&A’d Away

Minnesota’s publicly held companies fall into three categories: large blue-chip corporations listed on the New York Stock Exchange, midsize Nasdaq-listed companies, and a mix of small-company stocks traded in the local over-the-counter market. Of these, Nasdaq listings make up the majority of Minnesota’s publicly traded companies.

Many agree with Smaby that Sarbanes-Oxley is taking a toll, but other forces are also reducing the public company count, not just here but nationally.

“What’s really reduced these numbers is M&A [mergers and acquisitions] activity,” says Bethany Sherman, senior vice president for corporate communications for the Nasdaq OMX Group, which oversees the Nasdaq listings. Last year, for example, Nasdaq picked up 154 companies that did initial pubic offerings, but lost 224 companies due to M&A.

In Minnesota over the past six years, acquisitions have taken out at least 37 companies that at one time or another had been on the roster of the state’s largest public companies compiled annually by the St. Paul Pioneer Press. Twenty-one of those deals came in the past three years.

Investment bankers, attorneys, and other intermediaries, driven by fees, and corporate partners, who welcome the efficiencies they see in combining companies, have become more active in merger making. This year, a fresh flurry of acquisitions will reduce Minnesota’s public company count still more.

In January, Bloomington-based MGI Pharma, the fourth-largest Nasdaq-listed company in the state by market capitalization, was acquired for $3.9 billion by a Japanese drug maker. Other acquisitions this year have taken out two more of the top 30 Nasdaq companies in Minnesota: Grand Rapids–based ASV, a maker of loaders and other vehicles for the construction and heavy-duty markets, and Inver Grove Heights–based ethanol producer U.S. Bioenergy, which merged with a South Dakota ethanol company, VeraSun Energy.

Another four Nasdaq companies—Alexandria-based Rural Cellular and local med-techs Possis, Lifecore Biomedical, and Restore Medical—are being acquired in deals announced in recent months.

Over the decades, the growth of Minnesota-based public companies such as these has generated many well-paying jobs—not just in-house employment, but spinoff jobs at law and accounting firms, ad agencies, consultancies, investment firms, and other local employers. Many believe that the exodus of headquarters companies through acquisitions hurts the local economy.