The Minneapolis journal., 1901-03-04

w. G. Nicholas, in Pittsburg Dispatch.
The point which stands out most plain
| ly in connection with the great steel
combination is the imitation of capitalize
tiOn. On the basis of par value of pres
ent capital, the increase amounts to about
| $500, ,000, 600. Measured by quotations on
the stock exchange, the increase is nearer
$500, ,000,000. The deal does not in any
way increase the actual intrinsic value
of the plants to the extent of single
dollar.
| Reduced to an essence, the deal repre-
sents an increase OF nearly half billion
| dollars in securities without any appar-
] ent increase in value. The underwriting
| syndicate allows it to be known that the
responsibility involved in cash will not
| exceed $50, 900, 900. That means that the
amalgamation has been made on a basis
Of an exchange Of securities on the out
side valuation, leaving about $50,000,0 900
| in cash to be provided for in the buying
up of discontented elements, and in part
payment of the cost Of promotion.
Handfcaps on the Trust.
The new iron and steel trust enters
| business with fixed charges aggregating
about Sac, ,000, 900 year. Opposition can
begin with that advantage. 1t can open
up and invite trade with a foreknowledge
that the trust is obliged to earn $45, 5,000,-
900 before 1t can begin the payment Of
dividends.
Experts in the iron business agree that
the combined plants can be duplicated for
about $3.50, 600, 900, or $5O,0O0,0 900 less than
the first mortgage bonds. In other words,
the combination represents less than 25
per cent in intrinsic value and more than
70 per cent in earning power. This earn
ilg power is an indefinite proposition,
and it is that in which the public is in
vited to speculate. The statement is made
that, on the basis Of the earnings for the
past two years, the combined properties
are paying about $100, 900 net, or ap-
proimately 9 per cent on the capitaliza-
tion. The deal is organized in the food
time of a~period of extraordinary activity,
and in the very height of what is popu-
larly called good times" The basis
of promotion represents the very extreme
of effort on the part of the individuals
who built up the constituent corporations.
Experience teaches that when a business
loses its soul no increase in net earnings
can be expected. BY the same process
of reasoning, it cannot be expected that
can exceed the record history, which is
a fraction above 8 per cent on the capi-
talization.
This would seem to leave very small
margin for the SPECTATORS to invest their
money in the prospect Of dividend re-
turns on capital put in. The spirit Of
the street in regard to the great steel
combination is in line with this idea, and
is, therefore, pessimistic, although spe-
cialists are striving to put bullish con-
struction on what is going on.
Economics in the Trusts Favor.
The promotion end OF the argument Is
that the consolidation is in the best in
terests of the manufacturers, the pub
lie and the republican party. Mr.. Nor
gan sets forth the broad and general
proposition that, from every standpoint
the deal is wise and conservative. He
figures out that the combination means
economies in operation to the amount OF
about $3.50, 900 per year, part of