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THE CHINA MAIL, THURSDAY, DECEMBER 14, 1950.
CHAPTER 16 IN THE SERIES
COURTAULDS FORCED TO SELL THEIR AMERICAN INTERESTS
T
and
HE arbitration which benefit from much of the early could be assessed with any de-
of accuracy,
it took place between experience of their English rival, gree
and in addition they were in a seemned an extreme hardship to Courtaulds and the position to instal the newest and acquire by computalon property British Government most up-to-date machinery the true value of which it might in the year 1942 told 公 while that of the Viscose com- be impessible to ascertain. Upon story of the development pany had been in existence for the other hand the danger to
a considerable time.
the country
пе
imminent. Wag into enormous prosperity of
There was no possible alterna- tive to acceptance of American a great business enterprise.
and accordingly wishes, and
the Bri- which was probably unique
tish Government announced in commercial life; the re-
their willingness to acquire the cord which lay behind the
businesses in question and in arbitration of the great in
duc ternational difficulties and beset dangers which had
previous England in the ydar, and of the assistance given to the government by Mr Samuel Courtauld and his co-directors in order to overcome these difficulties may well have written page in English history.
A
What would have been the political result, if on the 14th of March 1941 Mr Courtauld had refused the request of the Chon- cellor of the Exchequer that Courtauld should on that very day sell to the government the whole of their immense Ameri- can resources, must be a matter of pure speculation.
Would it have delayed the giving by the United States of thut nancial aid of which Eng- land was so urgently in need? No one
one will ever know; every- one must be free to form his own opinion; after all the Arbitration was not concerned with specula- tion, it was merely required to assess compensation. For that to purpose it was necessary know something of the Cour- tauld history,
Silk mills
By the year 1937 the Viscose company was seriously affected by this competition. The manner in which the danger was over come is by no means the least of the company's achievements. Im- mediate and stringent reorgani-A
ation was essential and was at once adapted. Enormous suma
devoted
sted to that of money were erected on the most modern lines: reorganisation. Now mills were old machinery was scrapped and new plant on the latest lines
with the was installed,
result
that by the year 1941 the com-
petition had been overcome to
course to resell them to America. For the moment this announcement acquired the desired result
through the Senate upon March the 8th, 1941, and received the signature of the President of the United States upon March 11.
The Lend-Lease Bill passed
ot
Within a few hours a further such im extent that the com- grave issue arose. The Seven
Dollar was able to show for the Billion
Appropriation pany
would year 1941 the enormous trading Bill
come before Appropriation Committee profit of approximately 14 mil- the
and once,
unless lion dollars, with an esstimated almost
were passed the Increase for the next year to a that sum of no less than twenty mil Lend-Lease Bill would be com-
dollars. In bs much as lion
practically Courtaulds owned the whole share capital in the American Viscose company, cannot be a matter for surprise that they regarded the Viscose company as one of their most valuable assets.
Only hope
It
The cruel misfortune which resulted in the Arbitration with the British Government fell upon Courtaulds in the year 1941. At that time Britain's fortunes were at their lowest cbb. She and the Commonwealth were fighting the World War practically alone: all her financial resources were exhausted; her only hope of obtaining the munitions and sup- plies which she needed lay in such help as she could obtain America, and that help from was almost at an end. In order dollars with to provide the which to pay for their require ments in the United States, the compulsorily Government had
the
marketable acquired all American securlles in private hands, and there were no more practically left, Britain
The founder of the English family of Courtauld was one Augustine Courtauld who came from France in the 17th century as a Huguenot refugee, and his descendant George Courtauld set up the first of the Courtauld silk mills at Braintree in Essex in the 18th century. His son Samuel set up a similar factory at Barking in the same County in 1816. From that compara- penniless. tively small beginning; sprang the enormous enterprise now conducted by a limited com- pany, Courtaulds Limited, possessing a nominal capital of
£32,000,000,
and
was
It was in those desperate circumstances that Mr Roose- velt, perhaps Britain's greatest friend, decided upon the intro-
were
wrong,
the
tauld informed the Chancellor Treasury
there capital assets, such
as build- be a very ings etc. at cost less deprecia- that Courtaulds were prepared would of necessity
inquiry Into
tion were valued at £19,005,- to part with their American Intricate holding that day. The whole amount of the enormous ab 320, making a total for assets Viscose Company alone of over £30,000,000; transaction was completed with sois of the
the realisable value of and theso Agures allowed in a matter of hours. By the and
nothing for the value of good- moming of Monday March 17 those assets.
will, the New York press was able to state Britain had sold the Viscose Company to America All in July 1942 before Mr Justice opposition to the proposed Simonds, assisted
by legislature disappeared and the eminent Chartered Accountants,
The Arbitration
for
took place
two showed
Earned
the Treasury
und on
In addition the figures that the company extremely good profit. Eminent
to
Seven Billion Dollar Appropria- and Insted for many days, commercial tion Bill was unanimosly ap- The Attorney General appear- financial witnesses were called
on behalf of Courtaulds proved by the Appropriation ed Committee upon the next day, stoutly supported the Crown's give evidence that upon those figures they would expect, un- The danger was over,
main contention.
normal conditions, to+ realise upon ale of the Viscose Company a sum in the neighbourhood of £30,000,000.
True value
SU
the
gave
learned
der
The amount of money to be paid by the British Government to Courtaulds for their property was impossible to assess at that
Inasmuch
The expert
witnesses called. ime, and accordingly it was left
Arbitrator
an no reasona
behalf of the Crown took for future agreement, or subse
award at which he a very different view, and it quent arbitration; the price to be for the paid by America to the British finally arrived, it is of course was upon their cross examina-
that tho remarkable. Government was defined in a impossible to know upon what tlon,
between grounds he arrived at difference of opinion somewhat
agree netunl complicated
but from the almost all of them became decision, ment but can be expressed in his
Detailed examina. simple
itself it was apparent apparent, language:
American award bankers
did not regard the tlon of Anancial evidence is of who appeared as the that he
wearisome,
and it result of the American necessity purchasers were to make a pre- final liminary payment to the British issue os
may be sufficient to say that in by any means
the main they supported the clusive.
Government's contention.
THE CASE BOOK OF SIR PATRICK HASTINGS KC
con-
The greater part of the time occupied during the
the
Those were the kind of Arbitra- differences with which tion was taken up in an Learned Judge was confronted. attempt by both eldes to es How in the world wis tablish the true value of the possible for him to arrive at American Viscose Company
and
any possible conclusioni So far the evidence given waS
was from
assisted by the being certainly
remarkable if only evidence it seemed to me that reason of the extraordinary at the witnesses,
although no differences between the view doubt with
Inten- the best AB of great financial experts.
tions, had combined together to for as I am aware there never make his task more difficult. had
been
a prior pecasion when the value of a business of such magnitude had been the subject of a judicial en- shares in the Viscose Company quiry, and the dimculties in were to be issued to the Ameri- the way of arriving at a true can public; the amount of money result were obviously present realised upon such issues it to the minds of everyone con- greater than the preliminary cerned. payment was to be handed over to the British Treasury.
Treasury and
the
The preliminary payment was the
The award
During
agreed at the sum of 30,450,000 evidence, it was 'mpossible to had been, the Arbitrator. Upon
thereafter paratively useless. The Isola- tion opposition were not satis- fed by the announcement al- ready made; to them it appeared as nothing more than a pious hope. They insisted that some tangible proof should be given of British good faith; they insisted that at least one of these busi- sold nesses should actually bo to America by the British Gov- ernment before the Seven Bil- BILL Appropriation lion Dollar should become law, and for the purpose they selected the Ameri-
Viscose can
Company. The British Government were off- cially informed that it was ab- solutely essential that actual sale of the Viscose Company to America should be completed immediately and indeed before March 15,
duction of the American Lend Utmost urgency
Accordingly
од
March
14
Lease Bill. If that Bill, together with its necessary adjunct, the Seven Billion Dollar Appropria- tion Bill, became law, American the Chancellor of the Exchequer aid to a practically unlimited asked Mr Samuel Courtauld to extent woud be available to the call upon him at the Treasury. United Kingdom; if those bills The Chancellor received Mr Cour- failed to obtain the approval of tauld with the utmost sympathy; the American legislature disaster he explained that the reasons
necessitating of that would seem to be inevitable.
the
acquisition
ог
At first the Courtauld business consisted mainly, if not wholly, of the manufacture of natural silk, but as the years passed by chemical research discovered the possibility of manufacturing an artificial substitute by treating vegetable cellulose with caustic
as a result diery
articial slik,
is as it
TIDW called, rayon
born.
Courtaulde were Was
to
the realise quickly importance of this discovery and they devoted a great deal of time and money to its develop- ment. At the beginning of the present century they commenced to manufacture artificial silk, and fron that date it may well be raid that they were pioneers in the rayon industry.
Rayon industry
The Arbitration was not con-
with cerned
the company's English business, but only with such part of their undertaking as existed in America. In 1010 Courtaulds had decided that useful and profitable extension
Isolationists
of
to
avront
ac-
the
that they were
imagine endeavouring to
the lime which clapsed between the conclu- son of the hearing and the announcement of the award to I amused myself by try'ng to the imagine regard Having
upon what basis
sla I portant position of many of
should have acted if I myself to give witnesses called
the whole I think I should dollars, (roughly nine million, ima
not
have started with the fart that pounds.) Although this prelim
the Assist
the business realised £10,000,- nary payment amounted to An Arbitrator to the best of their 000 under a forced sole trk'ng enormous sum of money, Cour- ability, but their opinions
abnormal conditions, place in taulds were horrifled as to the
to say the least of and to that smallness of the amount when irreconcilable;
amount I should the variations
have added auch further' sum compared with their estimate of
ran into millions of pounds, the value
as in my opinion would have of their asset, and
been reallood if the sale had they expressed their disapproval
been entirely free and the in no unmeasured terms, but
conditions were entirely nor- they had no option except to walt the pending issue, and then If still dissatisfled to resort to arbitration,
were,
Extremely good
mal,
Whether The v'ew which Courtaulds
or not that would Fought to maintain was in its have been the proper method, or indeed have any relation The disposal of the shares in essence extremely simple: they
that the only fair whatever' to the principles America took a good
many suggested months to complete, and the way in which to assess the true upon which the learned Judge
Was to acted, we of n business
shall never know. fipal realisation was found 'o value
All that remain certain is amount to some 62,000,000, dol- ascertain the real value of its lars, which amount, when ade scertained
and the amount when that when the award camo to
sublect to ony be made it was for a sum of justed in a manner considered by the Treasury to be reasonable possib
formed the basis upon resulted in n sum payable to on,
The Arbitration had been a Courtaulds of £16,700,000.
which the true value could be
interesting experience, ixed. If those assets corned most
of in- and it left with me a reflection amount
possible difficulty in realisu- £27,125,000.
In
Even this sum, large as it was, a reasonable was considered by Courtaulds ternet, all that remained was a that was even more absorbing. to be insufficient, and they in-matter of almost mathematical If, on that day in Murch 1941 formed the Treasury that they calculation. were not prepared to accept that
support of this conten- Agure as representing the true
supplied with value of what they had lost, and tion I that they would require the pro- figures which certainly showed Sennte, per amount to be assessed by that the success of the Ameri- would have been the result an Arbitrator, and accordingly can Viscose Company had been upon the Arbitration was commenced. remarkable,
Opposing views
WAB
tha Mr Courtauld had refused Chancellor's request, would the bave Lend-Lease legislation
the American through passed
and if not, what
subsequent history? If
and that its the risk of failure was at that
Anancial tremely good,
had assets volved following
and showed
result:
Was position
ex- time a very real one, what The realisable
sum of money would the Bri- been carefully tish Government have been the prepared to pay to obylate the the net risk?
valued at £11,727,207;
Both sides agreed that the sale current assets, such as market- had been forced upon Courtaulds able securlies, cash and stock and consequently the value to were be ascertained must be based upen a hypothetical assumption, namely that of an assumed pur chase by a willing buyer from a willing seller, in other words a salo at a fair price.
by the government of the shares in the American Viscose Com pany were not only imperative but of the utmost urgency; he expressed the wish that Cour Unfortunately the passing of taulds would assist the govern- those two Bills was by no means ment by voluntarily consenting
America a foregone conclusion.
to the transfer of those shares. at that time had not entered the hut at the same time he made war and there existed In that it clear that if the transfer was not voluntary the government country a large body of political
option opinion, particularly the Isola- would have no
acquire the
proper tionists, who were against any
The form of American participation compulsorily.
government great were in a in the European struggle, and themselves
difficulty. While they already consequently were bitterly op-
power possessed
under the posed to the projected legisla poss
They put forward their quire by compulsion all market-
Powers Act to tion.
Emergency contentions in support
the able
securities, they possessed of which Vancial
perhaps the were
suficiently wide to arguments
no powerg thought to carry most weight enable them to acquire While fully aware
that Britain a
American Viscose Company's had disposed of all her market shares, and although they would ded undoubtedly be able to obtain able securities, they contended of their business could be deve that in as much as there still sufficient power by passing a loped in America, where, at- existed large business concerns now regulation, that would take that time, the rayon industry in America owned entirely by some le time and could not be was scarcely in existence. Ac- British ahareholders, those con-
con done before March 16, the last cordingly in that year they cerns at least should be sold date by which the whole trans- formed a company in Pennsyl- to Americans, before the United action had to be completed. It vania under the name
of States should be naked to supply was in those circumstances that "American Viscose Company, further aid to Britain; in the Mr Courtauld was virtually ask- to develop business
forefront of their argument they ed for his assistance. placed the case of the American
This request placed Mr Cour- in England, The
The Viscope Company. As the date
tauld and his co-directors them- development of the American for the passing of the Bills ap-
position of the the opposition of the selves in a
appeared to cess which it achieved is
harden, greatest difficulty. If they had as remaritable as that of Cour- until at lost a moment arose been free agents practically no taulds themselves. it erected when it seemed possible that the sum of money would have been many mills in Virginia and two Bills might never become large enough to induce them to Pennsylvania and in its early law unless the British Govern- part with their American hold- years the business increased ment first agreed to acquire ing but they were bound to no- with immense rapidity.
these businesses and then to preciate the grave and, indeed resell them to America.
a most inauspicious moment. ous situation in which
Government wero Not unnaturally this great en-
If the Ameri- terprise
This fact placed the British faced. At all costs the Goon began to attract
in their American competitors. Large Government in a position of can legislation must be paril. American companies sprang into considerable difficulty. On the It would have been impossible existence, all of which started one hand it was quite impossible for them to refuse such help as With with manifest advantages In to place upon any of their busi lay within their power. that they were in a position to ness concerns ទ value which the utmost reluctance Mr Cour-
elsely the samo lines carried OF
on pre-
as that
Company and the immense suc- tionists
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What was a fair price? And upon what basis was it to be as- certained?
to
Upon the one hand the Treasury contended that in * matter of such magnitude the only possible way of arriving at the proper Ogure was take the
actual sum in fact real'sed
by the American issue, namely £16,700,000. On the other hond Courtaulds maintained that the actual sum criterion realised would be no whatever by reason of the fact that the sale had not only been forced upon them, but had been
rushed sale taking place
0
at
Treasury were right. view, the arbitration would be a very simple matter, as there was no poss ble dis- pute as to the amount paid by the
if the investing public:
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