Armour and the Mexican Sulphur Rush
Booth, Paul
A Sulphur Rush is underway in Mexico on the Isthmus of Tehuantepec, which faces the Gulf of Mexico. Among the dozen American companies itching for a share of the treasure is Gulf Sulphur...
...The exchange of stock would eventually dilute Armour's interest from the present 9.5% to between five and six percent...
...Mexico already ranks as the third largest producer of sulphur, behing the United States and Canada...
...and Emilio Azcarraga, television station owner...
...Extracting outfits must be 66% owned by either private Mexican interests or the government itself, and the U.S...
...The Court did turn down an Armour request to postpone the shareholders' meetings (at which the merger was approved...
...Gulf's assets were $23 million, and Lithium's were $9.6 million, as of December 31, 1966...
...In addition, the purchase prices paid by the Mexican interests for their majority shares in foreign companies are substantial ($66 million in the case of Pan American, for example...
...the other companies are waiting in line while their concession applications are processed...
...it says that the merger would be a "reckless and improvident speculation" for Gulf...
...Sulphur is commanding a high price, with demand outrunning supply by one million to two million tons a year...
...I think they acquired our stock with the thought of expanding the position and ultimately acquiring Gulf Sulphur or our sulphur deposits, either directly or indirectly...
...The merger, already approved by stockholders and...
...with the sharply increased prices of the material, this disadvantage will certainly have a noticeable effect on the profitability of Armour's chemical operations...
...Traditionally, sulphur has been used in making paper, rubber and other industrial products, but an additional use - fertilizers - is the key to the sulphur rush...
...This obviously whets the appetite for developing the Mexican find...
...In addition, agricultural chemical producers, who see tremendous profit opportunities in providing fertilizers for the world war on hunger, are renewing their interest in these sulphur deposits...
...Enrique Madero, manganese magnate...
...However, as The Wall Street Journal explained in a story titled "Mexico's Pan American Sulphur Control Bid Likely to Pain Holders Less Than Expected," the lower taxes, higher export quotas (they were generally doubled), and the rising market price for sulphur indicated that profits would triple, allowing Pasco to earn as much with a 34% share as had been earned from the old full share...
...To get out from under Armour influence and to expand domestically, Gulf is in the process of acquiring Lithium Corporation of America, which has mineral deposits in Great Salt Lake, Utah, that are used in fertilizer production...
...The total estimated reserves involved may run as high as 100 million tons: Pan American Sulphur Company's Mexican reserves run to 30 million tons, and Gulf Sulphur's run to 10 million...
...Armour bought its 153,300 shares in Gulf Sulphur last summer as part of its diversification program, dovetailing neatly with its expanding agrichemical operations...
...To do so would be in violation of anti-trust laws...
...I believe Armour now realized theycannot acquire Gulf Sulphur...
...This year has seen a number of price increases for the raw material, continuing the trend begun in 1965...
...Furthermore, an additional $9 per ton increase this year was predicted in early May by the President of Gulf Sulphur...
...The Mexican businessmen who are being brought in to share the profits include some of that country's fattest cats: Bruno Pagliai, steel industialist...
...In January the price per ton rose by $2.50 and in March by another $4, bringing the price to $33 per ton...
...The real impact of this development on Armour is that it denies them a special advantage over other fertilizer producers who have access to sulphur...
...Ed...
...On May 16, 1967, the Delaware Supreme Court heard arguments from Gulf and Armour relating to the contested merger...
...Among the dozen American companies itching for a share of the treasure is Gulf Sulphur Company, of Houston, in which Armour & Company holds 9.5% of the stock...
...Besides Pan American and Gulf, the eager firms include Texas Gulf Sulphur, three oil companies (Continental, Cities Service, and Banff of Canada), two chemical companies (International Minerals and Chemical and Hooker), International Helium, and an outfit called National Bulk Carriers, Inc., the latter of which is controlled by shipping financier Daniel K. Ludwig...
...We feel they intend to harass us every way they can to encourage us to buy their stock in Gulf Sulphur at their cost...
...Jose Garcia, President of Mexico's mine-owners association...
...total "free-world" comsumption reached 25 million tons last year...
...writing only the resolution of an Armour suit to prevent it from taking place that is underway now in Delaware courts, would lead to a new corporate name: Gulf Resources and Chemical Corporation...
...firms retain the minority share...
...The Mexican government has imposed quite rigid conditions on the exploitation of her sulphur...
...The results of that hearing have not yet been made available to us...
...Pan American, Gulf, Texas Gulf, and International Helium already have concessions ard are working out the details of the Mexicanized ownership...
...The case of Gulf Sulphur shows the domestic ramifications of the Mexican situation...
...Armour is asking permission to inspect books...
...Gulf's 1966 sales were $10.5 million, and Lithium's were $6.7 million...
...Armour claims that Gulf's proxy statement didn't put forward all the facts of the merger, and fudged on the plans for potassium mining in Utah...
...Without knowing any of the legal precedents, my guess is that Armour won't win its case and doesn't expect to...
...Robert Allen, President of Gulf, says: "It's pretty clear that Armour is in desperate need of a source of elemental sulphur...
Vol. 1 • June 1967 • No. 4
