Business: Impact 50

In March, CVS Corp. completed a $27-billion buyout of Caremark Rx Inc., the nation’s second-largest pharmacy-benefits manager.

The Providence Journal / Bob Thayer Bob Thayer

A continuing tide of investment capital washes across the bulwarks of American businesses, bringing with it corporate raiders and buyout specialists looking to net new catches they can bring to market.

The flow of money — and the acquisitions that come with it — moves faster now than when it began more than a year ago, continuing a record pace into summer.

Just last week, General Electric Co. agreed to sell its plastics division to Saudi Arabia’s largest industrial company, Saudi Basic Industries Corp., for $11.6 billion.

The announcement followed news that telecommunications company Alltel Corp. agreed to be acquired for $24.8 billion, and that China’s upstart state investment company will invest $3 billion in Blackstone Group LP, the second-largest U.S. private-equity firm, which snapped up credit-card services provider Alliance Data Systems Corp. for $6.43 billion.

Billionaires Warren Buffett, Edward Lampert and Carl Icahn all have said they will add to their equity investments, helping boost investor confidence in stocks even as the Dow Jones Industrial Average has ridden a 1,300-point wave in the past two months.

Rhode Island businesses do not stand isolated from the torrent of money poured into deals.

Among the biggest players was CVS Corp., which in March completed a $27-billion buyout of Caremark Rx Inc., the nation’s second-largest pharmacy-benefits manager. The Woonsocket-based drugstore chain, now known as CVS/Caremark Corp., became one of the nation’s 20-largest corporations as a result of the deal.

In other cases, Rhode Island-based companies gave themselves up to buyers willing to shell out billions of dollars.

European companies acquired a pair of Rhode Island-based public companies. Schneider Electric SA took over American Power Conversion, of South Kingstown, and Lottomatica SpA took over GTECH Holdings Corp., of Providence.

APC, founded in 1981 by three researchers from MIT, grew into a global leader in backup power and cooling equipment for corporate data centers. It employs 1,144 people at its headquarters. Weak earnings and a falling stock price during the last two years made APC a target for a takeover. One of the company’s largest shareholders agitated for a sale, questioning the Rhode Island company’s business strategy.

The $6.1-billion sale to Schneider, of Rueil Malmaison, France, expands APC’s international reach in the electrical appliance sector. Schneider makes and sells products that help distribute and manage electricity — such as circuit breakers.

APC’s new president, Laurent Vernerey, pledged to improve the company’s philanthropic efforts and commitment to Rhode Island. He planned to move his family here from Australia.

“APC is an incredible success story for the State of Rhode Island,” he said, “I want to pledge myself to renew the presence of APC in the community.”

Italian lottery operator Lottomatica purchased GTECH for $4.8 billion in a deal announced last August.

GTECH’s management team will be responsible for running the combined entity, which includes operating the Italian lottery, one of the largest in the world.

The company employs about 6,100 people worldwide, including 1,100 in Rhode Island. Of those, 500 work in Providence at the headquarters along Waterplace Park.

As GTECH’s ownership shifted, its Rhode Island real-estate holdings also changed hands. In January, a Massachusetts real-estate developer paid $43 million to acquire the gambling-technology company’s corporate campus in West Greenwich. GTECH is leasing 170,000 square feet on the site.

In Providence, GTECH maintains its global headquarters in four floors it leases in the $80-million office building at the corner of Francis Street and Memorial Boulevard, which was developed by USAA Real Estate Co. and Commonwealth Ventures.

A.T. Cross got out of the real-estate business this year as well, selling its Lincoln headquarters for $15.7 million.

The company said the sale will allow management to focus on its core business lines and fund acquisitions. It is a maker of writing instruments, leather goods, Costa Del Mar sunglasses and other items.

A.T. Cross had transferred a significant portion of its manufacturing overseas in recent years, freeing space in the 291,000-square-foot building it owned just off Route 116 in Lincoln. The company now leases a portion of the building from Albion Crossing LLC, a real-estate partnership, for its headquarters.

Telecommunications companies won a key victory late last year that will help them enter local cable TV markets.

In December, the Federal Communications Commission voted to limit the ability of local governments to block the entrance of new competitors in cable markets. The vote forces local cable franchising authorities to speed approvals of service applications and limits their ability to impose spending commitments on new market entrants.

Telecommunication companies Verizon Communication Inc. and AT&T Inc. lobbied aggressively to ease the obtaining of local franchises. Each company is sinking billions of dollars into networks that deliver video programming.

Verizon is opening stores elsewhere in the country, dubbed Verizon Experience, to sell its new fiber-optic system television, telephone and high-speed Internet service.

About the same time the FCC came to Verizon’s aid, Rhode Island cable regulators awarded the company a “compliance certificate” for serving Warwick and six other communities in the central part of the state, making it the first new cable company to enter the state in 20 years.

The company said its goal is to make the service available to that section of the state by the end of next month and has applied to serve Providence and 11 other communities. That will set up competition with the state’s dominant cable provider, Cox Communications.

The network TV market began changing in the last year as well, with local outlets going up for sale.

A year ago, Media General Inc. bought WJAR Channel 10, Rhode Island’s most-watched TV station.

Media General, of Virginia, invests in multi-format media operations and owns 26 TV stations, 75 online enterprises, 25 daily newspapers, 100 weekly newspapers and other publications.

In March, two former executives of Meredith Broadcasting Group agreed to buy WLNE-TV Channel 6 from Freedom Communications, which has owned the stations since 1983.

Kevin P. O’Brien and his partner, Robinson Ewert, said they are looking to invest in Channel 6 to make it more competitive with rival channels 10 and 12.

Meanwhile, Providence-based LIN TV Corp., owner of WPRI Channel 12 and operator of WNAC Channel 64, said earlier this month it hired an investment firm to evaluate its options, including the possible sale of the company.

LIN owns or operates 30 TV stations in 18 midsize markets in the United States and Puerto Rico.

The changes mirror a national trend as buyouts in U.S. media markets accelerate. Clear Channel, the owner of Rhode Island stations WHJJ-AM, WHJY-FM, WSNE-FM and WWBB-FM, all in Providence, agreed in mid-May to a $19.5-billion takeover by private-equity buyers Thomas H. Lee Partners and Bain Capital LLC.

Print-media outlets saw new competitors enter the marketplace as well last year, as the Journal Register Co. sold its holdings in Rhode Island and Massachusetts.

The future of nine Rhode Island newspapers lies in presenting them as "hyper-local" publications, each focused on small parts of the state, while streamlining publishing costs and advertising sales, said media market analysts.

"You’ll always have a pretty constant basis of readership," said Charles Strauzer of CJS Securities, in New York City. "You need the local papers as a small businessman."

In January, Journal Register sold all its Rhode Island newspapers for $7.6 million to R.I.S.N. Operations Inc., a Delaware corporation with ties to an Illinois-based newspaper group.

The sale includes four dailies and five weekly or twice-weekly newspapers. The dailies include: The Call, of Woonsocket; The Times, of Pawtucket; the Kent County Daily Times and the Warwick Daily Times. The weeklies, all members of the Southern Rhode Island Newspaper Group in Wakefield, include: the Chariho Times, the Coventry Courier, the East Greenwich Pendulum, the Narragansett Times and the Standard-Times in North Kingstown.

A short time later, Journal Register completed the sale of its seven Southeastern Massachusetts newspapers to GateHouse Media, of Fairport, N.Y., for $70 million in cash. The deal included The Herald News, of Fall River, and the Taunton Daily Gazette, as well as three weekly newspapers and two shopper publications.

GateHouse also owns The MetroWest Daily News, of Framingham; The Patriot Ledger, of Quincy; and The Enterprise, of Brockton, along with a string of weeklies that surround Boston. Earlier this month, GateHouse bought four dailies from Gannett Co., including the Norwich Bulletin, in Connecticut. Also last month, the New York media company closed on a $380-million acquisition of nine newspapers from Copley Press Inc. that had a combined circulation of 241,000. GateHouse now has more than 80 daily papers in 19 states.

GateHouse is backed by Fortress Investment Group, a newly public company with a simple plan for building a media empire — buy publications with little or no competition and high profit margins. It then bolts the publications together in regional clusters to cut back-office expenses and uses the savings to build an online presence.

Equity analysts at Wachovia Capital Markets LLC see a lot of upside for GateHouse, valuing the company’s stock as high as $24 a share, significantly above its current price of around $18.

“We think GateHouse has a relatively better position versus its peers, given its greater exposure to local advertising, has numerous acquisition opportunities in the fragmented community newspaper business and has an opportunity to grow its online revenue more in line with industry peers,” Wachovia said in a May 16 report.

GateHouse is close to announcing online partnerships to help drive its growth, according to Wachovia.

Banking, meanwhile, has stratified in Rhode Island, with three national banks at the top, a small middle group, and a bunch of tiny community institutions.

In the middle group are Rhode Island-based Washington Trust Bancorp and Bancorp Rhode Island. Tagging along with those two is Newport Bancorp with a stock price muddling along in the low teens and a market capitalization below $70 million. The middle is always a tough place to be in any market sector; you’re always a target of both larger and smaller players. Banking is no different. Bancorp Rhode Island, the parent of Bank Rhode Island, only recently fought off a shareholder revolt aimed at spurring its sale.

In the manufacturing sector, Summer Infant Inc., a Cumberland-based company which produces children’s health and safety products, became a public company. Astro-Med Inc., of West Warwick, continues to successfully manufacture and sell worldwide its printing and measurement instruments.

Things have not gone well at Nestor Inc., a Providence-based maker of traffic-surveillance cameras. Last week, the company fired its chief executive officer after its stock price plummeted from $6.90 to 51 cents in 18 months.

A year ago, a Texas-based enterprise ended its nearly 50-year association with nearby Attleboro, Mass., when the company sold a major division to a Boston-based investment firm.

Texas Instruments ran one of Attleboro’s — and the region’s — biggest and best-known manufacturing operations, employing generations of workers from Southeastern Massachusetts and Rhode Island.

TI, as the company is sometimes called, sold its Attleboro-based Sensors & Controls unit to Bain Capital LLC of Boston in a transaction worth $3 billion. Sensors & Controls had $1.1 billion in annual sales and about 5,400 employees worldwide, including 1,100 in Attleboro. Bain renamed the company Sensata Technologies Inc.

Middletown manufacturer KVH Industries Inc., a maker of satellite communication devices, is in a pattern of steady growth.

KVH is investing $2 million to build new offices in its 75,000-square-foot headquarters in Middletown and recently expanded its Chicago manufacturing plant.

KVH also plans a separate, $14-million, building near its headquarters. Rhode Island also will become an outpost of a growing Connecticut company — Alexion Pharmaceuticals Inc., of Cheshire. Alexion paid $13 million for the idle Dow Chemical building adjacent to the Fidelity Investments campus off Douglas Pike in Smithfield, where it plans to manufacture the blood-disorder drug Soliris. Company officials said they’ll bring more than 80 jobs to the Smithfield plant after putting another $13 million into renovations.

The director of the state’s economic development agency last year pointed to Alexion as an example of Rhode Island’s ability to win in the cash-infused business climate.

"I think that if we continue to play offense and we continue to improve our business climate and we continue to shape an innovation economy that gives companies a strategic reason for being here, we will win our fair share," of new businesses, said Saul Kaplan, executive director of the Rhode Island Economic Development Corporation.

pgrimald@projo.com