Lost 'Fortune'

Constellation sale would leave Baltimore without a '500' company

May 01, 2011|By Jean Marbella and Jamie Smith Hopkins, The Baltimore Sun

Walk the streets of downtown Baltimore, and you might feel the presence of its corporate ghosts. On Gay Street, perhaps you'll meet Alexander Brown, the Irish immigrant who started the nation's first investment firm here more than 200 years ago.

Head to Light Street, and you'll come upon skyscrapers that housed the USF&G insurance company and, a couple blocks north, Maryland National Bank, whose familiar gold-topped tower remains long after the state's then-largest banking company was sold and sold again.

And over at 750 E. Pratt is Constellation Energy, new and glassy but already poised to join the cast of this chilly tale: corporations that through various mergers and acquisitions have packed up their headquarters and left town.

Is Baltimore now the kind of city depicted on television in "The Office," home to a branch rather than main office of the Dunder Mifflins of the world?

There's an "ego element" to the list for cities that are home to some of those headquarters, said economist Mark Vitner of Wells Fargo, the giant San Francisco financial services company. "Fortune 500 companies are large, they're visible and they add to the big-city feel of an area." "

The announcement this week that Chicago-based Exelon Corp. has struck a deal to take over Constellation came as something of a psychic blow to the city. If the $7.9 billion deal passes regulatory hurdles, and the parent of local utility BGE is absorbed by its out-of-town suitor, then Baltimore will lose its sole remaining Fortune 500 company headquarters.

Just two years ago, the region was home to three such headquarters. But then Black & Decker was acquired by a Connecticut company in March 2010 and folded into Stanley Black & Decker, and Legg Mason's revenue was hit so hard by the financial meltdown that it fell off of the list.

Meanwhile, when Maryland tried to attract a trophy company, such as Northrop Grumman, those efforts failed. Ironically enough, Constellation CEO Mayo A. Shattuck III was enlisted to help woo the Fortune 100 defense contractor but Team Maryland lost to Virginia.

On Thursday, exactly one year and one day later, Maryland learned it could lose Constellation as a home-grown, free-standing entity.

Already, the soul-searching is beginning, with some rueing yet another diminishment of Baltimore's prestige, even as some argue that the Fortune 500 listing is no longer the be-all marker of a local economy's vitality.

"I have mixed views. I own a couple hundred shares [of Constellation stock], so I'll do all right. But from a Maryland point of view, we're going to miss having that headquarters," said Aris Melissaratos, the state's former secretary of economic development.

"But it's still a sad day," he said. "This will continue to be a fine city, but it won't be the same not having Mayo down the street."

Maryland has long fought the image that its tax rates and regulatory climate drive out existing businesses and scare away new ones.

"You can listen to all the arguments coming out of Annapolis, how business-friendly Maryland is, but in the business world, there is a perception — right or wrong, the perception's certainly there — that Maryland is not business-friendly," said A.B. "Buzzy" Krongard, former chairman and chief executive of Alex. Brown.

Krongard thinks the long line of corporate headquarters to exit the area isn't so much a statement about the city as about the state, and its proximity to particularly business-welcoming ones.

"When you have states like Delaware and Virginia right next to you that are perceived as very pro-business or business-friendly, the odds are against you," he said.

Melissaratos, now special adviser for enterprise development to the president of the Johns Hopkins University, said he's seen a shift in the city's corporate culture: In the past, companies here tended to be the ones that acquired other businesses; now it's the other way around.

"We can't even keep Ed Hale in business," he said wryly, referring to the chairman and CEO of Baltimore's largest locally owned bank, 1st Mariner, who is stepping down as part of a deal with a New York investment company to shore up its capital.

While corporate headquarters remain valuable to cities, they need to focus more on jobs which, these days, are more likely to come from newer and small- or medium-sized companies, some experts said.

Joel Kotkin, an author and consultant on urban trends, said the number of corporate headquarters is "an important measurement, but it doesn't determine everything about a city." Kotkin, a fellow in urban futures at Chapman University in Orange, Calif., and whose books include "The City: A Global History," said the question should not be why corporations are leaving town as much as what, if anything, is taking their place.

"The problem is Baltimore isn't generating the new companies the way cities like Houston or Seattle are," Kotkin said. "You don't create new companies, but you're losing the old ones."

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