674 



NATURE 



[July 28, 192 1 



The holders of ordinary shares were more for- 

 tunate. The valuation of the net assets available 

 for distribution to them showed a total of 

 348,000/., and for this they received 174,000!. of 

 7 per cent, preference, 174,000!. of 8 per cent, 

 preferred ordinary, and 450,000!. of 8 per cent, 

 deferred ordinary shares, the last-named repre- 

 senting "goodwill, patent and other rights." Evi- 

 dently the Sub-committee felt that such generosity 

 requires an explanation, particularly as "It has 

 been alleged that for fifteen years before the war 

 Messrs. Levinstein's had not paid a dividend"; 

 but the members were satisfied with the reflection 

 that "the policy of the company had in general 

 been not to pay out profits in dividends, but to put 

 the profits back into the business" (clause 21). 

 Fifteen years' abnegation of all dividends would 

 certainly appear to merit recompense, but the fact 

 that the present market valuation of the 798,000!. 

 scarcely exceeds 100,000!. is a curious comment 

 on the propriety of the original allocation. "The 

 net value of the assets of British Dyes, Ltd., 

 showed a total of 1,143,580!. available for dis- 

 tribution to the ordinary shareholders, and this 

 was satisfied as to one-half by the issue of prefer- 

 ence shares and as to the other half by the issue 

 of preferred ordinary shares in the Corporation. 

 In addition, the shareholders in British Dyes, 

 Ltd., were entitled to an issue of 550,000 deferred 

 ordinary shares in respect of goodwill, patent and 

 other rights " (clause 20). Thus 1,000,000!. of 

 deferred ordinary shares were created, adding 

 80,000!. per annum to the interest charges. 



The Report is not so clear as to the allocation 

 made to the Government. The statement that 

 "The Government subscribed for 850,000 prefer- 

 ence and 850,000 preferred ordinary shares in 

 substitution for the loan on debentures to British 

 Dyes, Ltd., of 1,700,000!. to which they were 

 committed " (clause 10), does not reveal the 

 proportion of the 1,700,000!. which had been 

 loaned to British Dyes, Ltd. ; the sum 

 mentioned is that "to which they were com- 

 mitted," and it has not been publicly stated 

 that the amount actually loaned was in excess of 

 1,200,000!. Remembering that the Government 

 debenture was at 4 per cent., and that the average 

 nominal rate of the preference and preferred 

 ordinary shares is 'j\ per cent., it will be recog- 

 nised that this allocation represented an additional 

 interest charge of at least 60,000!. per annum on 

 the earning capacity of the Corporation. 



Conclusion (7), nevertheless, states that the 

 thirteen agreed members "do not consider that 

 NO. 2700, VOL. I07I 



the Corporation is under the handicap of over- 

 capitalisation, except in so far as the buildings^ 

 plant, etc., of the British Dyestuffs Corporation, 

 Ltd., were erected at a time of high prices and 

 feverish conditions," whilst Major Barnes's con- 

 viction is that "the Corporation is over-capitalised^ 

 and the Government, before investing public 

 monies in same, should have insisted on the build- 

 ings and plant provided out of the abnormal war 

 profits being written down to pre-war costs." 

 Those who have difficulty in deciding between 

 these conflicting opinions may be assisted by the 

 recollection that the German companies, with 

 which the Corporation must ultimately find itself 

 in competition, have consistently practised the 

 policy of under-capitalisation by returning a large 

 proportion of their profits to the business in the 

 form of expenditure on development and research. 

 The Sub-committee is silent on this point. One of 

 the inducements to potential subscribers offered by 

 the prospectus of the British Dyestuffs Corpora- 

 tion in 1919 was a synopsis of the profits earned 

 by the German "Big Four " during 1913, showing 

 2,499,592!. to have been the fruit of share capital 

 and reserves aggregating 9,886,318!. ; owing to 

 the prudent policy indicated above, however, the 

 nominal ten millions were notoriously nearer 

 twenty millions in actual value, thus reducing the 

 profit to the neighbourhood of 12 per cent., which 

 is not an excessive figure for an industry which 

 was virtually a world-monopoly. 



In addition to the capital inflation indicated 

 above, one most regrettable feature of the amal- 

 gamation was the destruction of the co-operative 

 character of British Dyes, Ltd. Shareholders in 

 that company were confined to dye-users, and the 

 rate of interest was limited to 6 per cent, so long 

 as the Government debenture remained unre- 

 deemed. Consequently, there was no inducement 

 to charge prices higher than would pay this 

 modest interest and provide funds for the prosecu- 

 tion of research and the development of new pro- 

 cesses. "The influence of the amalgamation on 

 prices is submerged by the other influences at 

 work, and our attempts to single it out .for 

 separate examination have proved fruitless " 

 (clause 39). Nevertheless, the schedule of prices 

 for dyes is a startling contribution to the Report, 

 showing percentage increases in March, 192 1, \ 

 over July, 1914, which are seldom less than 500, 

 and often exceed 1000 ; but there is no evidence to 

 show that they are in any way due to the com- 

 bination. That is really the conclusion of the 

 whole matter, and whilst the sessions of the Sub- 



