Business & Finance: Steel War (cont.)

The citizens of Youngstown, Ohio, last week had their most exciting seven days since the week of April 6, 1917, when the self-conscious steel town mobilized for War. In the War week, Youngstown went forth to meet the enemy; last week, the enemy was not only at Youngstown’s gates, but actually within them. For the stockholders of Youngstown Sheet & Tube Co. were assembled, in person or by proxy, to determine whether the city’s chief support and chief crown was to survive as an independent company or was to become a part of great Bethlehem (TIME, March 24, April 7).

When, on Tuesday morning, the stockholders entered the dim, musty assembly room of the Dollar Savings Bank Building, the issue seemed entirely clear. As old Chairman James A. Campbell took his seat under the faded portraits of Youngstown bankers long dead, it only remained to count the votes to discover if three weeks of campaigning had brought Cyrus Stephen Eaton enough strength to block the merger.

So it stood on Tuesday morning, and so, to all intents, it stood in the late Friday afternoon when hysterical stockholders demanded to be released from the barred doors of their seventh chaotic session. Four days of wild confusion had not settled the issue, had indeed only befogged it. The scene of the voting had changed to the fine, big Stambaugh auditorium. But the scene of the real battle had moved, far from the tired, bitter stockholders, into the comparative quiet of the courts. Neither Cyrus Eaton nor Jim Campbell, nor Grace and Schwab of Bethlehem, nor the Mather brothers of Cleveland, held the key to Youngstown’s riddle. For four days, this object was in the hands of a hitherto obscure but extremely genial jurist by the name of C. S. Turnbaugh.

Into the lap of Judge Turnbaugh, sitting on the edge of his bed at the Hotel Ohio, the lawyers had dumped the stockholders’ battle at midnight Tuesday, while the balloting was taking place. There were Luther M. Day of Cleveland, with his feet on the radiator, arguing for Eaton, and distinguished Newton D. Baker, pulling at his black pipe, arguing for Campbell. The question concerned 51,038 shares of stock, and just what the stock was, and whence it had come, and who could vote it. Now held by the Eaton forces, it had been bought after I p. m. on March 22, the hour when the books were closed for stockholders’ voting, but the proxies had been turned over to the promerger committee and on Tuesday morning had been voted. For Eaton, Lawyer Day demanded that the votes be not counted.

Wednesday, while stockholders met in public debate in the auditorium, Judge Turnbaugh tipped the scales twice, first toward Campbell by denying the Eaton demand, then back again with a temporary injunction, based upon another point of law, restraining the counting of the 51,038 shares. Late Wednesday night, another injunction included all proxies transferred after March 22. In all, some 91,000 shares were thus withdrawn from the voting, and it appeared on Thursday morning that this block would cut down the Campbell vote below the necessary two-thirds.

On Thursday, too, it became clear that the stockholders might as well break camp and leave the battle where Eaton had thrown it, in the courts. Newton Baker confessed himself “bewildered by what has happened,” declared that Bethlehem would now “tell Sheet & Tube to get rid of its lawsuits before the deal can be settled. Is it conceivable that a madman would go through with a deal like this as long as there are suits lying around?” Two points remained upon which suits could be brought: I) Could the Otis-owned stock be voted for the merger; 2) When the promerger forces bought stock at prices above the market, were they buying stock or votes? And if they were buying votes, were they not violating Ohio law? With these two points in mind, Cyrus Eaton promised to “fight the merger to the last ditch.” Thus on Friday, when Judge Turnbaugh carefully dissolved the injunction and allowed the disputed 91,000 votes to be counted, the merger victory (857,821 votes; 799,141 were required) was very hollow indeed. Scenes of great confusion marked the final stockholders’ meeting when the result was announced. Above all things, the promerger forces feared another injunction. Leslie Gould, smart reporter for the New York Evening Post, was pulled, angrily protesting, from the telephone booth where he was giving his paper the story. Irritated anti-merger leaders demanded, and finally obtained the right to leave the guarded room, but not until after a woman had become hysterical. After the meeting, Grace and Camp bell issued polite and proper paeans of pleasure, but everyone knew that Steel’s great battle had passed from the control of steelmen and stockholders into the hands of the Law. Busimen, steelmen waited to see what the Law would do.