Steel Deal

Few & far between lately have been the big mergers which characterized 1928 and 1929. Last week however there was announced a deal of major significance, of major size, in a major industry. Bethlehem Steel Corp. bought McClintic-Marshall Corp., steel fabricators, for $32,000,000, thereby became a bigger competitor of U. S. Steel Corp. than ever before.

In 1900 Andrew William Mellon was already a tycoon to be reckoned with. He was 45, lean and quiet. The Union Trust which he had founded eleven years prior had grown and become a mighty instrument in his skilled hands. He had an iron in many industrial fires already glowing, he had irons in other fires just kindling. Nine years had passed since he had bought into Aluminum Co. of America and the investment began to look promising. He held a lot of bonds in an oil company sponsored by that picturesque Pittsburgher, J. M. Guffey. Six years later those bonds were to give him control of the company which would turn into great Gulf Oil and an impregnable fortune.

One day Mr. Mellon was in the offices of Pottstown Iron Co., of which he was a director. Two young engineers working for the Shiffier Bridge Co. came to see him with the idea of getting his backing and setting up in business for them selves. Taller of the two was lanky Howard H. McClintic. Much shorter was Charles D. Marshall. Mr. Mellon heard their case and was silent. Iron and Steel had not yet definitely settled into its corporate departments, the financier reflected. Finally he consented. A company was formed and the new team of McClintic-Marshall entered the business of taking rolled steel from the mills and fabricating it to construction specifications.

Slowly the U. S. industrial picture began to change. In 1901 Andrew Carnegie sold out to Manhattan bankers and United States Steel Corp. came into being. Four years later energetic Charles M. Schwab formed Bethlehem Steel Corp. Steel began to be used widely for buildings. McClintic-Marshall prospered. One of their first orders was from the Marshall Field store. Anxious to please, with much to learn, they shipped the girders by express. Much other business followed. By 1929 McClintic-Marshall was doing a $50,000,000-a-year business, had a 600,000-ton capacity. Its only sizable competitor was American Bridge Co., subsidiary of United States Steel Corp. American Bridge builds fewer bridges than McClintic-Marshall, more buildings. Great is the competition between the two companies, although when steel was needed in a hurry for the Empire State Building the two had to cooperate, furnished steel for alternate floors.

In the McClintic-Marshall-U.S. Steel rivalry is the nucleus of last week's deal. Competition between U. S. Steel and Bethlehem has lately become more intense. Steelmen are especially aware that in 1926 U. S. Steel began to manufacture solid flange beams by the so-called Gray Process, which Bethlehem controlled. A $250,000,000 patent suit followed, was settled out of court in 1929, with Bethlehem granting U. S. Steel the right to use the process. This enabled American Bridge to compete better with other fabricators who bought Bethlehem's beams in which the Gray Process was used. The competition became more visible when Bethlehem sought to acquire Youngstown Sheet & Tube, leading independent in a territory reserved for U. S. Steel by a gentleman's agreement.

For more than two months wise Pittsburghers have been aware of the imminence of last week's deal. Bethlehem officials have been seen in McClintic-Marshall's offices, lunching with McClintic-Marshall men at the Duquesne Club. Hence when the announcement was made Pittsburgh was ready to judge its significance.

To Bethlehem the deal (accomplished by issuing treasury stock and notes) means an assured outlet for structural steel. It also means that the Mellon interests, now represented on the McClintic-Marshall board by Richard Beatty Mellon, will become relatively big Bethlehem stockholders, as occurred in Pullman when it acquired Standard Steel Car Corp. No small thing is a Mellon connection. Mr. McClintic and Mr. Marshall invested in the Koppers Co., have never missed a Koppers contract. McClintic-Marshall also owns securities in Aluminum Co., gets Aluminum's business. To Pittsburgh, the deal means the passing of another close family corporation.

Mr. Marshall will be elected to the Bethlehem Board, while George Henry Blakely, vice president of Bethlehem and known for his work in developing the Gray Process beam, will head McClintic-Marshall, to be reincorporated as a wholly-owned Bethlehem unit. Included in the deal is McClintic-Marshall's investment in Steel Frame House Co., of which E. H. Millard is president and young Robert H. McClintic vice president. Steel Frame House Co. is pioneering in perfecting small beams for residential purposes.

Greatly concerned by the deal were five independent fabricating companies each of which had piously hoped to be included in the Bethlehem purchase. Last week officials of these companies held a luncheon, decided mergers are now essentially in order.

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