Diamond Deal?

Tucked away in the detailed, careful, 133-page report of Diamond Match Co. for 1929 is the statement: "Your company's 10-year agency contract with the Swedish Match Co. expires December 31, 1930." No surprise was this statement for in December 1928, Ivar Kreuger's $350,000,000 Swedish Match Trust served formal notice upon Diamond that the agreement would not be extended. Yet the approach of the actual termination has made more vivid the question of who will soon be supplying the U. S. with strike-on-the-box matches.* Diamond has made a few, hints it may make more under favorable conditions. Herr Kreuger in his annual report spoke of planning to make, matches in the U. S. Yet no definite move has taken place.

Last week the outcome of the Swedish-Diamond break was still obfuscated, but suddenly wide circulation was given to the report that agile Herr Kreuger has found a solution. This solution, if true, amounts to no less than his buying 33% of the Diamond Match stock.

Unlikely as this might seem, two factors lent it credence. Last week Diamond Match prepared for a great capital reorganization. Causes of this were: 1) unfavorable taxation features in its present charter; 2) the lack of marketability in its highly priced, closely held stock. To stockholders the reorganization is one of the nicest gifts of an almost giftless year. For each share of common they will receive four new shares of common, five of participating preferred, a $25 cash bonus.

In this plan was one detail to which great significance was attached. Of the new stock, 350,000 shares will be sold to bankers at not less than $30 (present market price of new: $22 5/8). Quickly born were reports that this block will go to Herr Kreuger's group. In Sweden, the Match King denied it by saying he has taken no part in the present transaction. Also, Lee, Higginson & Co., his U. S. bankers, said they had heard no.thing of it. But the fact remained that Diamond does not need cash if it has enough to give a $25 extra dividend, is therefore selling this stock for another reason. Strange was the fact that from Diamond's mystery-shrouded, little-known President William Armstrong Fairburn, came no denial of the Swedish story. Strange, because here would be a great opportunity to appeal to patriotic instincts, to say Diamond will remain a U. S. company. From these facts, many a banker and broker came to the opinion that Herr Kreuger has found a way to remain in the U. S. market.

Should Herr Kreuger make this investment in Diamond, he will have a stake in the greatest U. S. match company, and in a demoralized U. S. industry. Diamond Match's assets at the end of last year were $27,000,000. Of this, $1 represented patents and goodwill although 20 years ago this item came to $4,000,000. Diamond has great timber stands in California, Maine, Idaho and other states. It owns many lumber yards, 40 of which are in California's Sacramento Valley. Its products have been extended as conditions in the match business became worse. Diamond Match now makes toothpicks, fence posts, golf-tees, home-building materials, waxed paper, toilet tissue. It is active in Great Britain, and some 70% of its income comes from other sources than making and selling matches in the U. S.

Great as Diamond is, however, and much as it lords over its 24 smaller competitors, its annual report treats dolorously of the many ills with which it is faced. Foreign dumping of matches in the U. S. (imports up to 10,000,000 gross boxes last year from 5,000,000 in 1928), and pricecutting by competitors, have kept the match business from being lucrative. The entrance of Swedish Match into the U. S. field with factories of its own would complicate conditions. It is conceivable that even Diamond's rivals would rather see it Kreuger & Diamond rather than Kreuger v. Diamond.

*Little known outside the U. S. are the large strike-anywhere matches.

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