Morning journal and courier., 1889-12-17
THE ENGLISH sYNDICATEs.

S0nb t0 InlB OOu0SIy-In0 OO"PAMy
 Promoters Take the Enterprises in
 Hand and Start Them on tho Road
 to Financial Success-Troublesom
 middlenen.
 From the Pittsburg Dispatchl
 A. Leo Veil, of 102 Fourth avenus, rs- turned home on Monday from ten weeks' trip to Londen and Paris. He was in Lon- don on professional business for some of the English syndicates operating in this country. A reporter called on him yesterday afternoon and asked him to explain the methods pur- sued by the English syndieates in purchasing and floating American industries. He said:
 ''I was much interested in that subject. To understand the peculiaritiss of the buai- ness it must be borne in mind that in Lon- don all companies are brought out publicly, and two.thirds of the stock must be offered for public subscription to entitle it's shares to place on the stock board. English companies invariably put in their prospee- tusss stipulation that the management will, immediately after registry of the company and allotment of it's stock, apply for enlisr- no investor will buy shares, as otherwise they fear a tic up, while with daily quota tion they can easily dispose of any stock they may have purchased. s'There are g large number of company promoters in London. These are usually trust companies, syndicates or regularly in- corporated promoting companies organized TOT that purpose. sgo slsos ,S& osaF z
 THE "ooMPANY PROMOTERS"
 Tho company promoters bring out the new enterprises, that is, publish the pro- spectuses, advertise the business and offer the shares of the proposed" compaay' for public subscription The company promo ters call to their assistance 'underwriters.' , There are organizations who insure the pro- moter that the public will subscribe for the stock of the new company, and if the public does not the underwriter is compelled by his contract to take and pay for the same. "The applications are generally to be made at the proposed company's bankers, whose names are published; also those of the bro- kers, solicitors, auditors, board of directors and officers. You will observe that the ma ohinery for bringing out an English company is sopewhat elaborate.
 AGENTS IN THIS COUNTRY.
 Promoting companies and syndicates, ss well as sone of the leading banking houses of London, have had and have now agents in this country soliciting options upon large business and industrial enterprises here. When an option is obtained it does not fol- low that sale will be made, as the propor tion of deals consummated to options taken is very small indeed. There are many solic- iting options who are not authorized by any | particular English parties, but, when they get their contracts, they go to London or | send them here and hawk them about from one financial institution to another.
 "The English syndicate or company, hay ing settled preliminaries, send some repre-. sentative of 8 prominent firm of London auditors to examine the books of the con- cern and make out a statement of it's income 1 and earnings for series of from three to | five years-sometimes more. This report of | the auditor is almost sacred matter to the British investor, and there are auditing firms l whose regulations extend over the whole | European continent, and whose influence | and financial power are second only to the largest banks or moneyed institutions. | THE PURCHASE FIGURED.
 "Upon this report the purchase is figured, usually the price agreed upon is sum upon which the average profits per annum for & period of three or five years would pay from l twelve to fifteen per cent. Having fixed | upon the price, contract is made whereby the wonders agree to sell to the syndicate for said sum, and the purchasers pay thereon g given reasonable time, from three months up, to pay the balance. The vendors are l generally required to stipulate to subscribe Tor ono-ehird >s tho shares of the new con- pany, and to retain the management of the l business.
 "Having executed this agreement, the company promoter and the syndicate revise the figures and sometimes the facts to suit 1 their purposes and prepare a prospectus for the company. The capital, instead of the amount for which the business was sold, is increased about twenty per cent. The earn ings or showing of profits on this increase is still very large to English eyes, because of | the following arrangement of the shares: An 1 issue of six per cent. debentures, usually | one-third of the whole capital, is made; also one-third of the capital is issued in prefer 1 ence shares, seven per cent, the other third is called ordinary shares, and the balance of the earnings, after paying six per cent. on the debentures and seven per cent. on the 1 preference, is applied to dividends on ordi- nary shares and hence fifteen per cent. on the whole amount of purchase price by this | distribution will be more than fifteen on the ordinary; and the advantages of first lien debentures and first preference shares make them also desirable investments, but, strange | to say, the sale of the debentures is more troublesome than that of the other classes of stock, due chiefly to the want of the specu- 1 lative element therein.
 | THE SYNDICATE ORGANIZED.
 "Having thus added twenty per cent. for their profit, and upon companies of two million dollars capital and upward this sum is very considerable, and smaller companies are seldom brought out. The syndicate then applies to the company promoter to organize and bring out the company: tho latter fur nishes board of directors, whose names are supposed to be tower of financial strength, also obtain frst-elass bankers,
 brokers and solicitors; the auditors make a new examination or new report 30 as to meet the requirements of the new conditions that is, @ much more elaborate and detailed transcripts from the books of the concern and after everything is ready the underwri- ter is applied to and is paid from three to ten per cent. to guarantee the subscriptions of the stock, three or four hundred thousand prospsetuses are mailed to possible invest ors, the abridged prospectus is published.
 "You will at once appreciate that twenty per cent. added to the whole price, which never gees into the treasury of the company, is a large amount of unproduetive capital on which to earn dividends, while the manage. ment is necessarily more expensive, and the owners, with two-thirds of their plant trans ferred into cash, are very likely to make new investments which will detract their atten- tion from the business, and their interest may not be so undivided as when they were l tho owners of the Whele enterprise. The