Business & Finance: Strange Merger

On to the U.S. industrial stage last week pranced a brand-new performer—handsome, broad-shouldered, 26-year-old Stanley Arnold Odium, son of famed investment trust magnate Floyd B. Odium, and a young buck out to show the world and his father that he could do a job. His first act was a juggling number called Great American Industries Inc., which already makes industrial rubber products, fire engines and tank rescue trucks, is adding telephones and electrical equipment. However much of a hodgepodge, Stanley’s venture is spreading like a grass fire and making big money in the process.

The whole thing began in 1940 after Stanley had quit Dartmouth, and started looking for something to do. With Father Floyd’s help he picked up a twelve-year-old semi-dormant investment trust, changed the name to Great American Industries, bought an outfit called Virginia Rubatex Corp., which makes hard & soft cellular rubber for insulation, gaskets, seat cushions, pontoons, etc. The rubber business flourished but young Odium wanted more diversification, found it in venerable Ward La France Truck Corp., one of the biggest U.S. makers of fire engines and custom-built, heavy-duty trucks. With these two in the corral, he went after Connecticut Telephone & Electric Corp. (interphone systems, signal alarms, aviation equipment), last month arranged a share-for-share swap with his Great American.

To push these deals through, young Odium had two big helpers: 1) experience gained from his financial-minded father, 2) the badly drawn excess profits tax law which penalizes companies with low peacetime earnings and limited invested capital, but helps oldtimers with large invested capital. An official proxy statement says that Great American has an “invested capital of not less than $30,000,000 . . . which means that at least $2,000,000 of net income is not subject to excess-profits taxes.”

An example of how U.S. tax laws sometimes encourage bigger & bigger mergers—at the very time when the Government is trying to preserve a competitive economy —Great American is nonetheless a husky warbaby. Its Rubatex division is full of Army-Navy orders for electrical insulation, rubber aircraft parts, etc.; Connecticut Telephone is producing much field equipment used by the Russians; Ward La France is producing giant rescue trucks for the Army. Result: since 1939 the combination’s sales have skyrocketed twentyfold to over $25,000,000, profits have jumped tenfold to over $600,000. Come peace, Stanley Odium (who will join the Air Corps soon) has other plans: concentrate on trucks, get Rubatex to supply the rubber parts, while Connecticut furnishes spark plugs and ignition systems.