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PUBLIC RECORD OFFICE

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TITLE CO885/25

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO

PUBLIC RECORD OFFICE, LONDON

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now the Metallgesellschaft has accumulated a reserve capital of 6-5 million marks.

For personal reasons, which do not concern us here, Mr. Wilhelm Merton resigned the management of his father's firm, Henry R. Merton & Company, which was turned into a limited company some years ago; but he retained his partnership and his authoritative influ- ence over the same. At any rate, the two great metal companies-Henry R. Merton & Company, Limited, of London, and the Metallgesellschaft E.G. of Frankfort-on-Main, are two absolutely independent concerns, although the close stock-capitalistic relations, of which we shall speak later on, as also the purely personal relations (one of the sons of Mr. W. Merton is one of the managers of the London firm) still con- tinue. The third metal company belonging to the Merton concern is the American Metal Company, which was established in 1878 by Henry R. Merton & Com- pany and the Metallgesellschaft, conjointly, and now operates with a capital of three million dollars.

These three companies carry on the original busi- ness of the concern-the metal trade-independently of one another, although they naturally remain in a cer- tain connexion and occasionally operate conjointly; and owing to the enormously increased consumption, especially of copper, but also of zinc, lead, and the rest of the metals, their trade has assumed vast dimensions.

The characteristic feature of the modern whole- sale trade in all its branches is its penetration into the production. Prior to the age of producer trusts the wholesale trade frequently represented the chief arbi- trator in the trade; it made the isolated producers dependent of itself, or at any rate derived large pecu-, niary advantages by profiting of the competition among the producers. As soon, however, as the producers themselves formed into trusts and fixed the market quotations at their own pleasure, and even tried to entirely exclude the wholesale trade by forming their own sale organizations, the wholesale trade was com- pelled to likewise engage in the production by partici- pation in such enterprises. This development is notice- able in the coal trade, in the iron trade, and also in the trade in other metals. In this new departure the metal trade was aided by its large capital.

This same development is noticeable also in the trade in precious metals, copper, zinc, lead, etc., there being, however, a difference in that in these latter trades, contrary to the coal and iron trades, the invest- ments are made chiefly in foreign oversea enterprises, which fact explains the extraordinary internationalism of the metal trade and its connexion with a large number of foreign undertakings. It goes without say- ing that with the participation in foreign enterprises the risk increased greatly, as compared with that run by the original commercial business, but this risk was balanced by the possibility of an extremely large increase of the profits. These investments or partici- pations were made, above all, in ore mines, and especi- ally in the exploitation of new mines. In this manner the leading metal dealers in the United States, the firm of M. Guggenheim & Sons, have gradually become mine owners rather than merchants. The senior partner of the firm, Mr. Daniel Guggenheim, is known as the "King of Colorado."

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In America, as well as in Germany, this participa- tion of the great metal firms in foreign mining enter- prises by-and-by assumed such proportions that their own capital did no longer suffice and foreign capital had to be invited to a great extent. In both countries the same very modern measures for the attainment of this object were taken, that is to say, participation and promoting companies were established. The former had for their object the taking over of the stocks of existing mining companies and to control the latter by right of possession of the shares (controlling com- panies), whereas the latter have to provide the capital for new enterprises and thus undertake the financing of these. In both cases there was obtained (1) an equal distribution of the risk, inasmuch as the stocks were allotted to a special company, whose principal share- holder was the metal firm which backed it but did not hold itself responsible for any debts of the daughter company; (2) in this manner foreign capital could be attracted without the metal firm losing the control over the producing companies, and this was done (a) by letting the promoting company take over only the minority of the mining companies' shares and keep- ing the majority to themselves, so that the whole capital of the controlling company was issued without the metal firm losing the control over the producers; or (b) the promoting company only get the majority of the mining shares, so that the minority of its own shares could be issued in public, and the metal firm still retained the control over the mines but reduced its need for capital.

These two different methods were employed by the Merton concern in a very interesting and diversified manner. The first step was taken in the three prin- cipal countries in which the enterprises of the concern had their seats, to the effect that the three commercial enterprises ceded their partnerships in the mining and metallurgical undertakings, to which they had become partners in the course of time, to special development or participation companies. Even if the mother company held the whole of the capital of these com- panies as was generally the case there was the advantage of a distribution of the risk, because the daughter company was a legally independent enter- prise. In a good many respects this arrangement actually means an extension of the credit. In this way there was established in 1897 the Metallurgische Gesellschaft, as a daughter company of the Metall- gesellschaft, with a capital of six million marks; in 1907, the Merton Metallurgical Company, Limited (capital one million pounds sterling, latest dividend 7 per cent.), As a daughter company of Henry R. Merton & Company, Limited; and in 1904, the Metallurgical Com- pany of America (capital two million dollars; 1.5 millions dollars prepaid), as a daughter company of the American Metal Company. The separation of these development companies from the three commer- cial companies had the effect that the latter, too, were able to act independently, whilst the relations of the branch companies controlled by the development com- panies became, in their turn, more independent of the different commercial mother companies.