Publication: Electrical Review
New York, NY, United States
The Sale of the Baltimore & Ohio
There seems to be no doubt from the facts as they are known at present, that the purchase of the Baltimore & Ohio Telegraph Company, its lines and properties, which was announced last week, is a personal purchase by Jay Gould.
Dr. Green, the President of the company, said two or three days ago, when negotiations were then believed to be approaching a conclusion, that no settlement could be accomplished, so far as the Western Union Company was concerned, without the approval of the Board of Directors and three-fifths of the stockholders. On the top of this statement he said, Thursday afternoon, that the Baltimore & Ohio property had been absolutely purchased by the Western Union and that the entire plant belonged to them. In the interval there had certainly been no opportunity to secure any consent from the stockholders, and it was only announced this morning that the Board of Directors had ratified the purchase. Taking Dr. Green's first statement as true, this ratification by the directors would not complete the sale. Moreover, this point was made on Wall street by men who are well acquainted with telegraph matters. The Western Union Telegraph Company has not now in its treasury the five millions of stock which is named as the purchase price, and therefore the corporation, as such, could not conclude "the transaction, simply because they could not pay for what they had bought. By many it is believed that the 50,000 shares of Western Union stock which have been transferred to the syndicate in payment of the Baltimore & Ohio property came out of Mr. Gould's personal strong box, and the stock of the Baltimore & Ohio Telegraph Company, amounting to over three millions of dollars, will or has been handed over to Mr. Gould.
The opinion gained ground yesterday on Wall street that the matter was arranged in this way in order to bring it to a prompt conclusion, and the reasons for the obvious haste were subjects of some speculation. It was not generally believed that Mr. Garrett's attitude in the matter is as compliant as representatives of the syndicate were disposed to announce. It was thought, in fact, that if the matter of the purchase had been delayed until after the arrival of the principal owner of the Baltimore & Ohio properties, it would not have gone through so smoothly and so satisfactorily to Mr. Gould. and the Western Union. "If everything was all right," said a Wall street man, "where was the necessity for such a rush? Why should not the proposition for purchase have been submitted to the directors and stockholders, and their consent obtained after the usual formula? There seems to be but one answer to these questions, and that is, that Mr. Gould and Mr. Morgan thought it wise and expedient to conclude the matter before Mr. Garrett's arrival."
Of course there is no idea down-town but that Mr. Gould had the right to buy the Baltimore and Ohio wires, or anything else that he can pay for; but the rather autocratic way to which the thing had been done, and the assumption that the Western Union stockholders would indorse his action in the matter without question, was widely commented upon. The annual meeting of the stockholders occurs the 12th inst., and the new issue of five millions of stock to reimburse Mr. Gould's outlay will undoubtedly be authorized at that time. In this connection it is pointed out that when proxies were asked for to use at its annual meeting, the stockholders did not understand that the matter of issuing new stock to such an amount as $5,000,000, or any other business of equal importance, would come up. It is not known that these proxies can now be re-called; but the door is certainly open to some very interesting speculations. In the same line with the dispatch from Philadelphia yesterday, announcing that the Baltimore and Ohio privileges in that city were secured under the express stipulation that the company would always maintain a competing line, and that its failure to observe this stipulation involved a confiscation of the wires and poles within the city limits, and the forfeiture of a fifty thousand dollar bond, it is interesting to note that the statutes of the State of Pennsylvania expressly prohibit any such sale as has been made of the Baltimore and Ohio property. The Western Union will probably lose, therefore, a portion of the plant in that State, and perhaps in other localities; but as the purchase was made nearly as much for the purpose of terminating competition as for the acquirement of the actual plant, this matter, and the little suits that are bound to grow out of it, will not probably trouble the Western Union people to any extent.
Another interesting question which has come up in connection with the transaction is whether or not, under the law of 1870 in this State, which was passed practically by representatives of the telegraph interests, the Western Union had any legal right to purchase the Baltimore and Ohio system. This act is to the effect that purchases of telegraph lines can be made for the purpose of extending connections into other States, and to complete the general service to the public. Certainly the system of the Baltimore and Ohio wires cannot be described as making connection with those of the Western Union, for they reach the same great points in parallel lines.
All the possible and probable effects of the consolidation were considered in Wall street offices. The effect on rates, the probable closing up of telegraph offices and dismissal of employes, and the outcome of the present situation, so far as the Mackay cable and the connecting land lines are concerned, were all industriously canvassed.
George Gould said that there would be no general advance in rates. The public might rest easy on that score. The service would be improved and rendered as efficient as possible in every direction. Mr. Somerville added to this what was understood to he an official statement to the effect that the existing schedule of Western Union rates would continue unchanged. He said that this corresponded with the Baltimore and Ohio schedule, except that to some points that company had established a 10 cent rate, and that this would be abolished. In conclusion Mr. Somerville referred to the pleasant fact that the Western Union was now in control of the telegraph wires along the trunk lines of railroads between the East and West, and animadverted on the fact that the construction of telegraph wires across country or along public hiyhways not traversed by railroad tracks had always been attended with failure.
It was stated early in the day in Wall street, with some appearance of authority, that Mr. Gould and his associates, having performed the act of deglutition in the case of the Baltimore and Ohio, were busily preparing another banquet, where the Mackay-Bennett cable and the United Lines would be the principal features. The story announced that Mr. Mackay was willing and that a price had been named, and that the whole affair was in the hands of Messrs. Edward Lauterbach and S. L. M. Barlow, whose desire for all-around so-called harmony and the consolidation of everything under the sun was counted on to remove every obstruction in the way of a sale. In respect to these statements Mr. De Castro, Vice-President of the Commercial Cable Company said that there was no truth in them. Mr. Mackay, he said, was not willing to sell, and that no price had been named. Mr. Mackay is in California and will not be East until late in November.
The situation in the matter of the opposition cable and the connecting lines on land seems to be that Mr Mackay is tired of the cable war, and is disposed to negotiate with Mr. Gould and the Western Union, with the idea of entering into some agreement on rates. Whatever agreement may be arrived at, it would cover the Postal and the United Lines system of wires. But whether or not the agreement would finally take the form of an actual sale cannot be forecast. The Mackay people say it will not.
A statistician in telegraph matters said that the consolidation would result ultimately in throwing 2,000 people out of employment. The Baltimore and Ohio Company has now 3,500 people in its employ, and under the new conditions only 1,500 of these will be required.