Mellons in Massachusetts

The number of U. S. corporations which can borrow $75,000,000 at one crack is relatively small, and their names are usually familiar to the average U. S. citizen. No surprise was the fact that Pacific Gas & Electric stepped into the capital market last week for $90,000,000 of refunding money. But when a banking group headed by First Boston Corp. and Mellon Securities Co., Inc. floated a $75,000,000 bond issue for Eastern Gas & Fuel Associates last week, many an investor had to plough through an 85-page prospectus to find out what the company did.

An integrated coal-coke-gas company, Eastern Gas & Fuel makes its headquarters in Boston but control lies in Pittsburgh. It is one of the two big subsidiaries of Koppers Co., a province in the Mellon empire. Other big Koppers subsidiary is Koppers Gas & Coke, whose activities include such diverse jobs as supplying gas to Montreal and creosoting ties for U. S. railroads. Both Eastern Gas and Koppers Gas grew out of a patented coke oven invented by a German named Heinrich Koppers, who improved the method of saving the gas and other coal derivatives formerly blown away in thick smoke. His process caught the eye of Pittsburgh's late Henry Bedinger Rust, who took his ideas for exploiting the Koppers patents to the Mellon family offices.

War boomed the Koppers business because it cut off the German supply of such explosive coal derivatives as ammonia, benzol, toluol. For three years Koppers' Rust built a coke plant every 60 days, a benzol-toluol plant every six weeks. Since these plants needed structural steel, Mr. Rust drew in the Pittsburgh steel team of Charles Donnell Marshall and Howard Hale McClintic. Today the parent Koppers Co. controls at least $400,000,000 worth of properties, has only 16 stockholders. The Mellons own a clear 50% of Koppers' stock, Mr. Marshall 16%, Mr. McClintic 9%, the Rust family about 10%.

Koppers Co. owns more than three-fourths of the stock in Eastern Gas & Fuel but in its registration statement it thought it politic to disclaim "any admission of the actual existence of effective control" by the Mellons or other Koppers stockholders.

From the original Koppers process to its present $227,000,000 form, Eastern Gas & Fuel expanded with curious logic. At first the coke plants were constructed for other companies but as soon as Koppers Co. started to build them for itself, it had to find an outlet for the gas. Though most Koppers units sell gas to local utilities, the gas companies serving Boston and its suburbs were bought outright. To use some of the coke it has a blast furnace near Boston. To insure supplies of coal West Virginia mines were acquired. To keep the mines operating efficiently, coal was marketed directly without coking it. To carry the coal to tidewater plants, Eastern Gas & Fuel went into shipping, now owns two freighters, 16 colliers, accounts for nearly one-fourth of the domestic coastwise receipts at the Port of Boston. To nudge its ships into Boston slips, it got into tugboats, now supplies a large part of the towing service in Boston harbor.

Under its present name Eastern Gas & Fuel dates only from 1929 when the big Koppers coke plants in Philadelphia and New Haven were combined with ships, tugs, mines, a blast furnace, and the Massachusetts gas and coke units. Last year Eastern Gas & Fuel was the third largest U. S. producer of bituminous coal, selling $22,000,000 worth in addition to its own enormous consumption. Company stores in company mining towns sold $"5,200,000 worth of goods to company employes, an activity which Stone & Webster Engineering Corp. in its report to the bankers laconically observed produced a "substantial portion of the earnings from mining operations." Coke and coal derivatives brought in nearly $14,000,000. Gas sales footed up to more than $15,000,000. Including sales of a small amount of electric power and pig iron, revenues from coal-handling, marine operations and other sources, Eastern Gas & Fuel last year took in a total of $59,000,000. That was about the same figure as the year before but higher expenses and bitter coke competition from bootleg anthracite coal pulled profits down from $4,135,000 in 1934 to $2,873,000 in 1935.

Prime purpose of the new $75,000,000 bond issue is to pay off subsidiary securities, thus promoting simplification of capital structure and reducing fixed charges. Many a famed Bostonian sits on Eastern Gas & Fuel's board of trustees, including Charles Francis Adams, Paul C. Cabot, Thomas Nelson Perkins. President is H. (for Halfdan) Lee, a Norwegian-born engineer who was named for the 9th Century Viking, Halfdan the Black. He changed the spelling of his surname from Lie to Lee, was trained by Founder Rust, likes to ski, sail, shoot. Eastern Gas & Fuel's real boss is Executive Committee Chairman John Thomas Tierney, who is president of parent Koppers Co. Short, stocky, hard-boiled Mr. Tierney spends a large part of his working day joshing his executives, has an office boy bring him a glass of water on the half hour, refuses to be photographed, likes to unbutton his vest after a hearty meal even in Pittsburgh's swank Allegheny Country Club.

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