Minnesota’s Fading Fortunes
Valspar Corp., a local Fortune 500 contender, is being acquired by Cleveland-based Sherwin-Williams Co. The deal marks the loss of another Minnesota headquarters. ( Photography by Craig Bares)

Minnesota’s Fading Fortunes

Concerns grow as the state loses more Fortune 500 headquarters.

The calendar had just turned to a new year when another Minnesota Fortune 500 headquarters office disappeared from the radar. On January 4, the Illinois-based Abbott Laboratories closed on its $23.6 billion acquisition of Little Canada-based St. Jude Medical LLC.

Founded here in 1976, St. Jude grew to be second only to Medtronic among medical device companies based in the state. Its $5.5 billion in revenue for 2015 placed it 465th on last year’s Fortune 500 list, one of 17 Minnesota companies that made the cut.

Since the ink is barely dry on the deal, there are no clear signals about what it means for the company’s workforce and presence in Minnesota, where it has about 4,000 of the company’s 18,000 employees. What is known, however, is that St. Jude joins a growing list of Fortune 500 companies to no longer call Minnesota home.

In 2010, there were 21 Minnesota companies on the Fortune list. When the new list lands in June, Minnesota will likely have 16 companies on the prestigious list, but the number could drop yet again by the time the year is out.

Meanwhile, concerns are growing about how this trend is affecting the state’s supply of well-paying jobs, intellectual and financial resources, and community resources—and whether anything will replace these losses.

Fortune 500 nexus

“I don’t think you can overstate the value of having company headquarters here in Minnesota,” says Charlie Weaver, executive director of the Minnesota Business Partnership.

In addition to leading organizations that employ thousands of Minnesotans—and adding to those ranks over time—the CEOS of Minnesota’s major companies here are deeply involved in the community. “They serve on boards here, they support startups here, they support small business growth here,” says Weaver.

Many of the best-known community assets in the Twin Cities—art museums, theater companies, education groups, professional sports venues—draw substantial corporate support. That makes Fortune 500s an important part of the ecosystem that creates an enviable quality of life in Minnesota, he says.

“We have partnerships with major brands because those companies are headquartered here, they employ so many people here and it’s been important to the leadership of those companies to support the hometown team. So yes, [the trend in large-company headquarters going elsewhere] is a concern,” says Minnesota Twins president and CEO Dave St. Peter.

Employees from these firms also tend to contribute significantly in volunteering opportunities. When Matt Kramer drops in at the Dorothy Day Center homeless center in downtown, St. Paul, he says that he routinely sees employees from companies such as Ecolab, Securian and Travelers helping on site. “That’s the day-to-day volunteerism of these companies,” says Kramer, vice president of university and government relations at the University of Minnesota. He notes that Minnesota typically ranks high on surveys of charitable giving and nonprofit support, adding, “A lot of that is driven by having that Fortune 500 nexus.”

And talent pools are affected when big headquarters decrease in number. “The impact of the talent that comes with having the corporate headquarters here is very significant. That’s why Minnesota is the way it is,” says Weaver, pointing to assets such as the high education rate and cultural attractions. “Having a headquarters economy here does help us compete globally.”

So why is Minnesota losing Fortune 500 headquarters?

It’s just business

It starts with their boards of directors and executive teams throwing in the towel—determining an acquirer could do better at continuing to grow the business. The sale provides shareholders of the Minnesota-based business with a nice return on their investments, and the acquirer then usually relocates the headquarters.

Why more major corporations are opting to sell out, rather than continue to build here, is unclear. Each situation is complex and different. But how the outside world views this state may shed some light.

Forbes ranked Minnesota 15th best for overall business climate in 2016. But the Tax Foundation ranked it as fifth worst in the nation in terms of business tax climate; TCB’s analysis of tax migration in April 2016 found billions of dollars in taxable income—and the business leaders generating it—are leaving the state due to its tax policies. The Ewing Marion Kauffman Foundation ranked the Twin Cities 38th among 40 large metro areas for its startup activity.

Another possible factor is available labor and cost of labor. Minnesota’s unemployment rate has been steadily low: the seasonally adjusted unemployment rate has been under 5 percent since June 2013. But its cost of labor is higher relative to other states. “It’s difficult to grow a young company here if you don’t have the talent,” Weaver says.

Read more from this issue

Throughout time, those who win have brought the spoils of their victories to their home cities. In 21st-century corporate America, that trend continues for the most part. But when it differs in Minnesota, it seems to be to the state’s disadvantage. For example, in buying Wells Fargo & Co. in 1998, Minneapolis-based Norwest decided to move its headquarters to Wells Fargo’s hometown of San Francisco. More recently, Pentair and Medtronic saw tax advantages to relocating their headquarters to Europe after acquiring businesses based overseas.

While some may feel an emotional pang when Minnesota loses a Fortune 500 headquarters location, Jim Campbell, who was a Norwest executive, says that settling the issue of the new company’s name and the headquarters location were simply business decisions.

“Market research said that Wells Fargo was a better brand to operate under,” recalls Campbell, who became CEO of Wells Fargo Bank Minnesota. “The reason that corporate headquarters went to San Francisco was that we knew we had to change the culture of Wells Fargo, and we probably couldn’t do that from Minneapolis.”

Campbell remembers calling Minnesota Gov. Arne Carlson on the day the deal was announced to break the news.

“He uttered a bunch of four-letter words about ‘How could you possibly do that?’ ” says Campbell. “It was a hard decision … sometimes you have to do what you realize is the pragmatic thing to do.”

Enough CEOs?

Historically, departures of Fortune 500 companies have not been a sign that the economic sky is falling in Minnesota because other businesses soon take their place, says Prof. Myles Shaver of the Carlson School of Management at the University of Minnesota, based on his analysis of decades’ worth of Fortune 500 lists.

When Fortune started its 500 list in 1955, Minnesota had 11 companies on it including long-forgotten names such as Seeger Refrigerator and Gould-National Batteries. By 2011, the number had grown to 20. Over that 56-year period, Minnesota added 40 to the list and lost 31 companies, including Control Data, Northwest Airlines and Cray Research. Some didn’t leave; they just didn’t stay large enough to remain on the Fortune 500.

As in the past, it appears that quite a few healthy companies are close to making the list. In 2016, Medina-based Polaris Industries Inc. ranked 528 with revenue of $4.7 billion, and St. Paul-based Securian Financial Group was at 551 with revenue of $4.4 billion. Mendota Heights-based Patterson Companies Inc. landed at 559 with revenue of $4.4 billion; Winona-based Fastenal Co. was at 607 with revenue of $3.9 billion.

Meanwhile, hundreds of businesses in other states are also close to the 500 mark and growing as fast, or faster, than Minnesota’s future crop. And that crop is seeing losses to other states as well.

In late January, Minneapolis-based Arctic Cat Inc., an iconic Minnesota brand, announced that it would be sold for $247 million to Rhode Island-based Textron Inc.

Valspar Corp., another Minnesota contender for the Fortune 500 list, is being acquired this year by Cleveland-based Sherwin-Williams Co. in an $11.3 billion deal. Valspar came in at 555 on Fortune’s latest list, with revenue just slightly below Securian’s. It has about 600 employees in Minnesota, primarily in downtown Minneapolis, and has roots in Minnesota dating back more than a century.

Executives with Sherwin-Williams, which already ranked 253 on the Fortune 500, have said that the combined company will continue to have a “significant presence” in Minneapolis. But an April 2016 filing from Valspar outlined an “enhanced merger severance program” for employees who are terminated within one year of the closing of the merger. Valspar’s filing tried to reassure hometown employees about the future: “The announced merger is all about growth.”

Other recent losses have been St. Paul-based Lawson Software Inc., purchased by New York-based Infor in 2011 and eventually affecting hundreds of jobs at Lawson’s former St. Paul headquarters; Minnetonka-based G&K Services Inc., which was acquired in March by Cincinnati-based Cintas Corp.; and Edina-based Nash Finch Co., acquired by Grand Rapids, Mich.-based Spartan Stores in 2013.

Loss of history

Headquarters moving elsewhere also erodes a part of Minnesota’s history. Twenty years from now, few remember the names of those businesses that were acquired by the surviving company.

St. Paul Cos. was a long-standing business and community presence in the Capital City, where it was founded in 1853. In 2004, the Minnesota-based insurance company acquired Hartford, Conn.-based Travelers Property Casualty Corp. At the time of the deal company leaders repeatedly stressed that the new, larger operation would stay in St. Paul. But within five years the “St. Paul” name and headquarters location were both gone. What has become Travelers Companies Inc. is now based in New York.

“They were a big player in downtown St. Paul,” says Bill Blazar, senior vice president of public affairs and business development at the Minnesota Chamber of Commerce. “You could objectively say that the presence in St. Paul is really reduced.”

The St. Paul Cos. had already made a few rounds of job cuts before the 2004 megadeal. At the time of the Travelers deal, the company had about 2,700 employees in downtown St. Paul. The company still employs 2,000 people in Minnesota. The remaining jobs are significant, but have clearly declined as the headquarters office disappeared.

More recently, there’s G&K, which was founded here in 1902 as Twin City Steam Dye Works. Two of Minnesota’s best-known companies—3M Co. and Target Corp., both Fortune 500s—started the same year as G&K. The publicly traded company reported revenue of $978 million for its fiscal 2016. But after being anchored in Minnesota for more than a century, headquarters is now in southwestern Ohio.

Honeywell’s corporate name lives on in Minnesota, where it still has 4,000 employees. The company moved out of its longtime Minneapolis headquarters campus after being acquired by Allied Signal in 1999. But the company has little presence as a business leader here; headquarters for Honeywell International Inc. is in New Jersey.

The list goes on.

On the flip side, Minnesota also has businesses such as UnitedHealth Group Inc. It alone has purchased dozens of businesses from around the country, and in so doing, added considerably to its employee and executive ranks in the state. Ecolab, General Mills and other major Minnesota corporations have acted similarly.

Perhaps even better, Minnesota has an odd tendency to retain most of a Fortune 500 company’s jobs even after its headquarters depart.

Another Headquarters Making Tracks

In late January, Minneapolis-based Arctic Cat Inc. announced that it would be sold for $247 million in cash to Rhode Island-based Textron Inc. While not a Fortune 500 firm, Arctic Cat, best known for its snowmobiles, is a classic Minnesota brand and company. Just last year, Arctic Cat moved its corporate office from Plymouth to the North Loop area of downtown Minneapolis, which has been a draw for startup, tech and creative companies. The company’s manufacturing operations and the majority of its employees are in the small northwestern Minnesota city of Thief River Falls. But everything may turn out just fine, says Brian Holmer, the mayor of Thief River Falls.

“On one side you’ve got the unknown,” says Holmer. “But on the other hand, it’s public that Arctic’s been sliding over the last couple of years.”

Arctic Cat’s sales dropped nearly $100 million from fiscal 2014 ($730.5 million) to fiscal 2016 ($632.9 million). For 2016, the company posted a net loss of $9.2 million. According to a company filing, Arctic Cat had 1,573 employees as of March 31, 2016—370 salaried and 1,203 identified as hourly and production personnel.

Textron’s acquisition of Arctic Cat closed in March.

Holmer says that many people are hopeful that the new owner with more financial muscle could ultimately be a good thing for Arctic Cat—and Thief River Falls.

“They’re very visible out in the community,” says Arctic Cat’s Holmer. “There might be some stability.”

Headquarters go, jobs remain

There are plenty of instances over the years where businesses have been acquired and, over time, most or all their jobs have moved elsewhere. But when it comes to the large-scale operations involved with Fortune 500s, most of the jobs tend to stay here.

Take the Norwest/Wells Fargo transaction. The Norwest name vanished and the headquarters moved to California. If the home office had stayed here, Minnesota could claim another Fortune 500; Wells Fargo was 27 on the latest list. But the bank still has a large footprint in Minnesota.

When Norwest acquired Wells Fargo in 1998, it had about 13,500 employees in Minnesota. Today the company has more than 20,000 employees in the state, ranking as the third-largest private employer in Minnesota, says John Hobot, a Wells Fargo spokesman. The bank employs more people in the state than Minnesota-based Fortune 500s such as UnitedHealth Group Inc. and 3M.

“You look at [a company] like Wells Fargo, for example. That was Norwest bank—look at what they’ve added,” says Blazar. He points to the bank taking over the former Honeywell headquarters in South Minneapolis and investing $300 million in its two new buildings in Downtown East. “Their presence in Minnesota is probably larger now than ever.” Other companies that have moved headquarters to other states also, more often than not, have retained large employee bases here.

In 2014 SpartanNash started a three-year multimillion-dollar renovation of its Edina offices a year after Nash Finch had been acquired and had its headquarters consolidated in Michigan. Several of the company’s departments—IT, legal, transportation, supply chain and more—remain based here, but the headcount at its Minneapolis service center has dropped from 500 to 350. SpartanNash also has 11 outstate grocery stores.

And then there’s Marlborough, Mass.-based Boston Scientific Corp., which acquired Indianapolis-based Guidant Corp., which had significant Minnesota operations, in 2006. Boston Scientific had already acquired Minnesota-based Scimed Life Systems Inc. in the 1990s. Minnesota is nationally known for the strength of its medical device industry.

Despite the company’s name, Boston Scientific currently has about 7,000 employees in Minnesota, compared with 2,800 employees in its headquarters state of Massachusetts. The Twin Cities are home to several important business units—interventional cardiology, rhythm management and peripheral interventions (products such as stents and catheters)—for the company.

“All three of those [units are headquartered in Minnesota and that’s where those divisional presidents sit as well,” says Tom Keppeler, a spokesman for Boston Scientific, which has about 25,000 employees worldwide.

‘We’re moving our headquarters’ (wink, wink)

Meanwhile, Pentair Inc. and Medtronic Inc. used acquisitions of companies based in Europe to “move” headquarters to tax-friendlier nations—a tactic known as an inversion. The Fortune 500 does not include companies based outside the U.S. If both were still officially based in Minnesota, the state would be able to count two more Fortune 500 firms.

In early 2015, Fridley-based Medtronic completed its acquisition of Covidien, a move that included officially moving the company’s headquarters to Dublin. But since the deal, the med-tech giant has added, not cut, jobs in Minnesota.

“Medtronic falls off the Fortune 500 list because it inverts?” says the Carlson School’s Shaver. “Those buildings aren’t empty.”

Today Medtronic has nearly 10,000 employees in Minnesota, says Fernando Vivanco, a spokesman for the company. In the wake of the Covidien deal, Medtronic pledged to add 1,000 jobs in Minnesota over the course of five years.

In 2012, Golden Valley-based Pentair relocated through inversion to Switzerland, then reincorporated in Ireland in 2014. In another twist, its incorporation in Ireland allows the company to have its current headquarters office in London.

Pentair is an example of the globalization of modern business. For 2015, the company drew 48 percent of its sales from the U.S. and 52 percent from its international markets. The company’s “management office” remains here, as do about 1,800 of its 26,000 worldwide employees. (That total will drop to 19,000 when Pentair completes the sale of its Valves & Controls unit.) If Pentair’s headquarters were still here, it would have ranked 404 on last year’s Fortune 500 list based on its 2015 revenue of $6.4 billion.

The road ahead

The pace of multibillion-dollar mergers and acquisitions isn’t going to slow down anytime soon. Many industries see an increased push for globalization. That climate drives increased consolidation because it’s much faster to buy a business than to build a business.

“It’s a national [and] international trend,” says Blazar. “The latest, greatest thinking in corporate management is that the way to grow is to acquire.”

The current round of deals including St. Jude, Valspar, Arctic Cat and others underscores the need for Minnesota to cultivate a business climate to grow the next generation of Fortune 500 companies, he adds. Doing so is “Minnesota’s hallmark,” he says.

Helping it is its broad diversity of industries. The current crop of Fortune 500s—from which often come entrepreneurs and spinoffs that eventually build new Fortune 500s—includes companies in a variety of industries: retail, finance, health care, food, logistics, agriculture and more.

In a technological age where headquarters can be located anywhere, Shaver says that the retention of a significant number of a company’s jobs here can be more important for the larger regional economy than hanging onto a C-suite.

But Weaver says that Fortune 500s help attract high-caliber talent pools, which in turn become another asset for the region. “It’s a huge boost to our quality of life,” says Weaver. “It’s not about the money, it’s about the talent.”


Business has gone global. But how many employees do major companies still have in Minnesota?

We Gave at the Office

There’s another side to corporate departures from Minnesota: It can also mean loss of local support from a company and its foundation. When arts groups or other nonprofits are gearing up to start a capital campaign for a new building or expansion, corporate foundations are the first to be tapped for support, says Trista Harris, president of the Minnesota Council on Foundations.

“Corporate partners are a huge part of the nonprofit community,” says Harris. “It really does have a big impact.”

Corporate grantmakers accounted for only 9 percent of all grantmakers in Minnesota, but accounted for 47 percent of the state’s total grant dollars, according to the foundation’s 2014 Giving in Minnesota report. The report, which is based on data from 2012, is the most current available from the foundation.

Based on the numbers from 2012, three of the top five grantmakers in the state were corporations: Target, General Mills and Cargill.

Harris says that she has seen cases where, after an acquisition takes a headquarters out of state, a company may initially remain consistent with its past donations. But after a few years, local support begins to quietly decline.

“I think part of it is that the energy sort of pulls toward wherever the new headquarters is,” says Harris. “Sometimes the corporate foundation is the last thing to get reorganized.”

Target Corp. and the Target Foundation gave a total of $104.8 million in 2014. Of that total, $25.4 million went to organizations in Minnesota. That means that a very significant chunk—24 percent—of its overall giving remained in its home state.

New York-based Travelers Cos. gave $19.4 million, of which $3.5 million was donated in Minnesota. While still substantial, it represents a smaller percentage—18 percent—of the company’s overall giving, compared with Minneapolis-based Target.

Over the long haul, MCF data shows that foundation and corporate giving directed to Minnesota nonprofits has been a declining percentage of overall giving. In 1986, 68 percent of grants made by foundations and corporations here stayed in the state. By 2012, the number had dropped to 48 percent. Given that companies account for nearly half of all giving in the state, the numbers suggest that more company grant money is going out of state.

Burl Gilyard is senior writer for TCB.