BusinessReport.com

When Albemarle Corporation first started thinking about packing up its executive headquarters and moving out of Richmond, Va., Baton Rouge was hardly a serious contender.

Sure, it was already home to the firm’s research laboratory, administrative offices and 600 employees. But Baton Rouge? Louisiana? With that reputation for dirty politics and poor schools?

St. Louis. Atlanta. Houston. Dallas. Those were the kind of places a Fortune 1000 multinational corporation could call home.

But then-Baton Rouge Area Chamber CEO Stephen Moret lobbied Albemarle hard in secret negotiations code-named “Project Home Run.” By January, Gov. Bobby Jindal took office and the Legislature later passed an ethics reform package and did away with a host of unpopular business taxes. When Moret became Louisiana Economic Development secretary, he managed to pull together a $7 million incentive package that, among other things, covers the company’s relocation expenses.

Suddenly, Baton Rouge looked even better than Houston.

“In the world of economic development, nothing is more exciting than landing a major corporate headquarters—especially a Fortune 1000 company,” Moret says. “This is definitely a home run.”

A little paper company

Albemarle had its beginnings in 1887 as Albemarle Paper Manufacturing Company. A handful of employees produced Kraft and blotting paper. In 1962, the firm borrowed $200 million and bought Ethyl Corporation—a Baton Rouge-based company more than 13 times its size. Ethyl had made its fortune producing tetraethyl lead, an anti-knock gasoline additive. It wasn’t until 1994 that Ethyl spun off its chemical businesses to create an independent, publicly traded company named Albemarle Corporation.

Today, the firm manufactures a wide range of specialty chemicals it sells to more than 3,400 customers in 100-plus countries. Albemarle is one of the largest global producers of the pain-reliever ibuprofen. It also leads the market for flame retardants—the kind you find in your couch stuffing or iPod—some of which use bromine, an element it gets from leased mines in Arkansas and the Dead Sea.

Albemarle’s annual revenues have more than doubled in the past five years to $2.34 billion. In the first quarter of 2008, the company reported net income of $68.3 million, or 68 cents per share—up from $58.1 million, or 60 cents per share, for the first quarter of 2007. Net sales were up $79 million to $688 million in the same period.

That’s thanks mostly to a series of divestures, acquisitions and alliances, many of them in Asia Pacific, Europe and South America. The strategy has Albemarle targeting core competencies and specialty chemical businesses, and has catapulted the company into top spots in nearly all of its global markets. Jindal predicts it won’t take long for Albemarle to make the Fortune 500 list.

Newly appointed BRAC CEO Adam Knapp says Baton Rouge began courting the firm’s executive offices back in 2004, during negotiations in which Louisiana paid Albemarle $6 million for its GSRI Road property for LSU’s South Campus. At the time, the company agreed to keep a $38 million payroll for the next decade.

“We really started the conversation back then,” Knapp says. “They said, ‘Right now, we want to focus on our research and development.’ But looking at where we are today, I think the groundwork was really laid in that deal.”

Scouting locations

Eighteen months ago, the company began considering spots to consolidate its executive and administrative offices. Chief Executive Officer Mark Rohr says Albemarle scouted locations in every major city as far north as St. Louis and south from Virginia and Texas. At the top of the list: Houston.

Baton Rouge—already home to Albemarle’s largest business and research centers—was “down the pack a bit,” Rohr admits.

“We debated a lot of different subjects,” he says. “Quality of schools, higher education—whether there are universities in the area that can provide new employees. A lot of the attributes related to the culture and quality of life. Travel is a big issue for us. The tax structure of the state—is it a good place to invest? And the quality of the government and our ability to interact with the government.”

Rohr says company executives were impressed with the city’s compassionate response after Hurricane Katrina, but the real change of heart came when Jindal was elected and the first two legislative sessions tackled ethics reform and business taxes. Jindal has strong connections to the firm—his wife, Supriya, worked there as a chemical engineer, and as late as April 2007, the family had 401(k) stock holdings in Albemarle, according to congressional financial disclosure statements.

Moret put together a nearly $7 million incentives package that includes $4.2 million in relocation expenses—$3.2 million from the governor’s Rapid Response Fund and another $1 million from city-parish government, if the Metro Council approves it this month as expected. Albemarle also gets payroll tax credits from the Quality Jobs program. Then Jindal and Rohr had a face-to-face meeting.

“We’ve been really impressed with this positive energy of which way the state is going,” Rohr says. “I think the combination of that and the interaction between all the branches of government and the civic leaders here really changed our minds.”

John Steitz, Albemarle’s Baton Rouge-based chief operating officer, says money really wasn’t a determining factor. “It’s just reimbursement of costs,” Rohr adds. “It was nice and it helps and it makes it a little bit easier, but it was more the spirit of cooperation that sold us.”

At a news conference late last month, Steitz, who has lived in Louisiana for eight years, told Jindal he was “no small part of why we’re here today. Your leadership and the environment you’ve created made us extremely comfortable with moving here.”

City-parish Chief Administrative Officer Walter Monsour says Baton Rouge was at its most aggressive in trying to recruit Albemarle’s executive headquarters. The process might now become a template of sorts for future efforts. For one thing, Monsour wants the council to put together a “deal-closing fund” so administrators can “act even more quickly than we were able to here.” This $1 million will be yanked from an undesignated surplus fund.

“We had 600 jobs here that we could have lost,” he says. “That’s big. So bringing 30 people in with the platform for them to go from a Fortune 1000 company to a Fortune 500 company is excellent. But if you step back and say, ‘We could have lost 600 jobs,’ well, that would have been horrendous.”

Good PR

Albemarle is the fifth Fortune 1000 firm in Louisiana and the second in Baton Rouge. The Shaw Group, which had $5.8 billion in revenues last year, ranks No. 426. CenturyTel of Monroe, Pool Corp. of Covington and Entergy of New Orleans also are on the list.

The headquarters brings with it 30 new executive- and professional-level jobs with an annual payroll of $7 million. That means an average salary of more than $230,000. Rohr says some of the firm’s employees won’t make the move to Baton Rouge, leaving some openings that must be filled.

An LSU economic impact study indicates Louisiana can expect a total of $26.9 million in new sales, $10.7 million in new earnings and 161 jobs during the first full year of operations. East Baton Rouge Parish is looking at $19.3 million in new sales, $9.6 million in new earnings and 117 new jobs.

Albemarle is also spending $15 million to expand its catalyst manufacturing facility, $6 million to build a polymer laboratory and $5 million to renovate its downtown offices in Chase South Tower. It also plans to build a $3 million hangar at the Baton Rouge Metropolitan Airport for its corporate jets.

Moret also notes the firm is “in acquisition mode,” having acquired five companies in the past five years. “Baton Rouge will become the growth platform for one of the leading companies in the world,” he says. “Albemarle is not on the stagnating list. They are growing revenue, growing dividends and finding new niche markets. This is a company that is growing. If they continue on this course, it’s going to mean a lot more jobs for our area.”

But the move’s most valuable benefit doesn’t carry a price tag. It’s what Jindal and others refer to as the “PR value.”

“For a company to invest what Albemarle will be investing, both in their money as well as their reputation, is a hell of a message to be sent out to the rest of the country,” Monsour says. “I think that’s going to rock some people back and they’re going to say, ‘Wait a minute. This company decided against Richmond, Va., against Houston, Texas, and decided on Baton Rouge?’”

Knapp says it has the potential to “send shockwaves” that will help the region in its recruiting efforts.

“You want to see there’s a confidence of leadership of the global companies to choose our region as their headquarters. That sends a signal when you are talking to anybody outside of the area. They’re going to say, ‘So who are your corporate headquarters?’ This is a company that does business in Asia and South America. So their decision sends a signal nationally and globally.”

Rohr also has made a commitment to work with the state and the city-parish to attract other top companies, and one such effort apparently is already under way. Monsour likens the concept to having recruited a top football player who then helps bring others along.

“This is a great example of what the administration intends to do, not only for the state, but for Baton Rouge,” Monsour says. “I think the governor now realizes as we do that Baton Rouge is now the center for businesses. It’s unfortunate that comes at the expense of New Orleans, because God knows all of us want New Orleans to be restored to what it was before. If that ever happens, then wonderful; if not, then we have to step up, and this is one of our steps in that direction.”