The Roswell daily record. [volume] (Roswell, N.M.) 1903-current, 1909-02-19
REPORT ON
TOBACCO

Washington, Feb. 19.-1n report
transmitted to President Roosevelt
last night, Herbert Knox Smith, Com
missioner of Corporations, presents
some highly interesting history OF
the organization of the Tobacco Com
bination", which, in the magnitude OF
its business operations, is one of the
greatest organizations in America.
The report is a result, in part, of an
extensive investigation into the tobac-
co industry made by the Bureau of
Corporations. Subsequent reports will
deal with the control of the tobacco
industry, with prices and profits, and
with competitive methods.
Today's report sets for the rise of
one of the great combinations of the
country. In his letter of transmittal,
Commissioner Smith says that it
deals with the history, from the
standpoint of it's organization, of the
great Tobacco Combination. Starting
in 1890 as The American Tobacco Com
pany manufacturer of cigarettes,
with a capital of S25,00O,O 900, the Com
bination has now a net capitalization
(exculding inter-company holdings) OF
$316,346,S21. 1t has absorbed about
250 separate concerns, and now con-
trolls substantially four-ffths of the
output of each important kind of to-
bacco manufactured in the United
States, with the exception of cigars.
This report sets forth the rise of
one of the great combinations OF the
country. In general, it's policy OF
growth has been by absorption. Be-
sides steadily increasing its own bus1-
ness, it has also entered from time to
time new branches of the industry,
formed combinations in these, and
bought ND independent concerns. Its
history also presents important feat
ureS of stock manipulation. The fnan-
cial transactions centering around the
organization of the Consolidated To-
ibacco Company in 1901 are especial
ly noteworthy. AT that time small
body of directors and stockholders in
the Combination believed that the pro-
fits of the Combination could be great
ly increased in the immediate future.
They based this belief in the condi-
tions in the industry, ON the concen-
tration brought about, and on the re-
duction of the war-revenue tax already
enacted, but not yet in effect. They
organized the Consolidated Tobacco
Company and offered it's bonds in ex-
change for the common stock of the
American and the Continental, in or
der thus to secure for themselves
most of the increased profits about
to accure. The offer was attractive be-
cause these bonds would give larg-
er return than the commOn-Stock hol-
ders had heretofore received ON the
stock of either of the two old compan-
les.
'-The stockholders at once accepted
this offer almost unanimously. In the
next three years and half, however,
there came the expected increase in
earnings upon which these directors
who arranged the exchange had coun-
ted. The profits accruing to the COM
mon stock of the American and the
Continental after it's acquisition by
the Consolidated, increased greatly,
and the small body of men controll-
ing the last-na-ned company-so small
in fact, that six of them held major
ity of it's stock and thus controlled
the entire ombination-became EMIT
led to millions of dollars, which, had
it not been for the Consolidated tran
saction, would have gone to the orig
inal common-stock holders.
I'm fairness, it should be added that
this offer of exchange was made with
no concealment of the fact that that
offer came from the principal officers
and directors of the two companies.
The Consolidated, moreover, furnished