Anaconda Copper: The Greatest Deal in Wall Street History?
- Joshua M Brown
- September 24th, 2012
Apropos of nothing, here's the amazing story of what might be the greatest M&A execution in Wall Street history...
The below is the true story of how the Anaconda Copper Company was purchased by William Rockefeller and Henry Rogers without their laying out a single dime of expenditure - they allowed the public enthusiasm for the stock market do the hard work for them...
Watch this deal happen in five simple steps:
1. Rogers and Rockefeller gave a check for $39 million to Marcus Daly for the Anaconda properties, on the condition that he would deposit it in the National City Bank and leave it untouched for an unspecified period.
2. They then set up a paper organization known as the Amalgamated Copper Company, with their own clerks as dummy directors, and caused Amalgamated to buy Anaconda - not for cash but for $75 million in Amalgamated stock which was conveniently printed for the purpose.
3. From the National City Bank, Rogers and Rockefeller now borrowed $39 million to cover the check they had given to Marcus Daly, and as collateral for this loan, they used the $75 million in Amalgamated stock.
4. They now sold the Amalgamated stock on the market (first having touted it through their brokers) for $75 million.
5. With the proceeds, they retired the $39 million loan from the National City Bank, and pocketed $36 million as their own profit on the deal.
It doesn't get any easier than that. When the stock market is in an uproar and eager to buy what companies are selling, they can do this sort of thing. That was 120 years ago or so.
Robert L. Heilbroner, author of the 1953 book The Worldly Philosophers from whence the above description came, called it a "free-for-all" that involved "a staggering dishonesty." He probably would not have been surprised, however, had he lived long enough to see Facebook buy Instagram for a billion dollars a week before it sold its own paper stock to investors in an IPO.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.