Pittston Brink's Group (Specimen)

Pittston Brink's Group (Specimen)
Item# 4286pitt

The seeds of the Pittston Brinks group were planted in the 19th century, when the U.S. coal-mining and railroad industries developed alongside each other. In 1838 the Pennsylvania Coal Company was organized in Pittston, Pennsylvania, to mine coal for Eastern markets. This company produced anthracite, or hard, coal and built a 46-mile railroad to transport it from Scranton, Pennsylvania, to the Hudson River. The Erie Railroad bought the Pennsylvania Coal Company in 1901, making it a subsidiary of its own mining and railroad operations. Fifteen years later an even larger company, the Alleghany Corporation, acquired the Erie Railroad. The Alleghany Corporation served as a holding company for a variety of businesses owned by the Van Sweringen brothers of Cleveland, Ohio, and their associates. It continued to operate the Erie Railroad and Pennsylvania Coal Company as parts of its railroad empire.

The Alleghany Corporation created the Pittston Company in January 1930. Competition in the hard-coal industry had intensified in the late 1920s, and antitrust laws prevented the Erie Railroad from entering new markets. To solve this problem, Alleghany organized Pittston and offered its stock at $20 per share to Erie Railroad stockholders. Alleghany retained a controlling interest in Pittston, and the Van Sweringens continued to run Pittston. Pittston then leased mines from the Erie Railroad and sold its coal through its own wholesale and retail subsidiaries. At the time of its founding, Pittston also acquired United States Distributing Corporation. United States Distributing was a holding company that owned United States Trucking Corporation; Independent Warehouses, Inc.; Pattison & Bowns, Inc., a wholesale coal distributor; and a Wyoming mining company.

Although it began as part of a large railroad empire, Pittston experienced hard times in its early years. The Great Depression slowed the nation's coal consumption, and Pittston had to borrow between $1 million and $2 million annually from its sister companies just to stay afloat. In 1935 J.P. Morgan & Co. stopped backing the Van Sweringens, and the Alleghany empire crumbled. Two years later investors Robert R. Young and Allan P. Kirby took over the remaining pieces of the Alleghany Corporation, including Pittston.

Pittston's fortunes began to turn around when Young and Kirby convinced J.P. Routh to become the Pittston Company's president. When Routh took over in 1939, Pittston's stock was down to 12.5 cents per share, and the company owed the Erie Railroad $10 million. Routh, who had owned his own wholesale coal business, established a plan for servicing Pittston's debt and began looking for ways to expand its business. He turned his attention to the growing bituminous, or soft, coal market. In 1944 he brought Pittston its first bituminous reserves with the purchase of 60 percent of Clinchfield Coal Corporation. Clinchfield Coal had been formed in 1906 when Ledyard Blair, Thomas Fortune Ryan, and George L. Carter merged together several smaller coal companies. Clinchfield Coal owned 300,000 acres of coal reserves in southwestern Virginia, and this acquisition permanently shifted Pittston's coal operations from Pennsylvania to Appalachia. Over the next four years Pittston invested heavily in Clinchfield Coal. In 1945 Pittston and Clinchfield Coal jointly acquired 67 percent of the Davis Coal & Coke Company. Seven years later Davis Coal & Coke was merged into Clinchfield Coal. In 1947 Pittston acquired Lillybrook Coal Company to increase its coal reserves. It also extensively drilled the Clinchfield properties for natural gas. In 1956 Pittston purchased the remaining 40 percent of Clinchfield Coal, making this highly profitable company a wholly owned subsidiary.

Under Routh's direction Pittston developed interests in oil marketing. In 1951 it acquired the Metropolitan Petroleum Corporation, a wholesale and retail oil distributor in New York City. Pittston expanded Metropolitan's geographical range by purchasing terminal facilities in Philadelphia, Boston, and Chicago. Its share of the fuel-oils business in the northeast rose considerably, and by 1954 fuel oil accounted for 38 percent of Pittston's net income. Metropolitan's expansion continued during the 1960s with the acquisition in 1963 and 1964 of two Boston fuel operations--Burton-Furber Company and Crystal Oil Company. It also entered the petrochemicals market by forming Metropolitan Petroleum Chemicals Company in 1965.

Pittston diversified beyond energy markets by developing trucking and warehousing operations under its United States Distributing Corporation subsidiary. This holding company's most important component was United States Trucking Corporation (USTC), which had been formed in 1919 by the merger of 26 trucking companies. USTC operated in five areas--armored-car services, truck rental, general rigging, baggage transfer, and general trucking. It handled newsprint deliveries for New York's and New Jersey's major newspapers, as well as the rigging work for Western Electric Company in New York City. Western Electric's rigging work included using pulley systems to move unwieldy switchboard equipment into skyscrapers. In 1954 Pittston acquired USTC's most prominent competitor, Motor Haulage Company, and merged its operations. In that same year, Pittston's trucking and warehousing operations accounted for 43 percent of its net income, surpassing both its coal and oil divisions. When Alleghany, Pittston's parent company, purchased the New York Central Railroad in 1954, antitrust concerns were raised about this new acquisition and Pittston's transportation operations in general. Alleghany solved this problem by divesting itself of its remaining 50 percent interest in Pittston, leaving it a fully independent company.

Pittston's most important diversification soon followed with the purchase of an interest in Brink's, Inc., a Chicago-based security transportation company. Brink's had been founded as a delivery company in 1859 and began making payroll deliveries in 1891. From there it had grown into the world's largest armored-car company, providing services to private businesses, banks, the Federal Reserve, and U.S. government mints. Pittston's interest in Brink's began in 1956, when it bought 22 percent of its stock. Pittston then applied to the Interstate Commerce Commission (ICC) for approval to purchase a majority share in Brink's. In 1958 the ICC approved Pittston's proposal, but the Justice Department objected on grounds that it could violate antitrust laws. A year later Pittston increased its interest in Brink's to 90 percent, but it ran into antitrust difficulty again when it proposed merging the operations of Brink's and United States Trucking. Pittston finally completed its purchase of Brink's in 1962 and made it a wholly owned subsidiary distinct from United States Trucking.

Brink's sold off its warehousing interests in 1984 and diversified into home-security services. Pittston established a Brink's Home Security subsidiary and began test marketing home-alarm and medical-monitoring systems. Through gradual expansion into new regional markets, Brink's Home Security became a successful venture and a national leader in this industry.

In 1982 Pittston undertook its first major diversification in 25 years with the acquisition of Burlington Northern Air Freight for $177 million. Pittston entered the air-freight business during a highly competitive period, hoping to carve out a place for itself in the overnight-express market. It invested heavily in building a hub for Burlington in Fort Wayne, Indiana, and then renamed the company Burlington Air Express to emphasize its overnight services. Despite these efforts Burlington's initial performance was disappointing, posting a $19 million loss in 1987. Nevertheless, Pittston, led by chairman, president, and chief executive officer Paul W. Douglas beginning in 1984, remained committed to developing its air-freight business. In 1987 it bought WTC Airlines, Inc., a group of companies specializing in air freight for the fashion industry, to expand Burlington's capacity and business. Soon thereafter Burlington began to turn around, experiencing net gains in 1988 and 1989 and accounting for 51 percent of Pittston's total revenues.

In 1993 Pittston began using a separate class of common stock known as tracking stock (or targeted or letter stock), which "tracked" the performance of the company's individual businesses. Pittston common stock was split into two parts: Pittston Services Group Common Stock and Pittston Minerals Group Common Stock. At the same time, for each share of Pittston stock, shareholders also received a tax-free distribution of one-fifth of a Pittston Minerals Group. By the end of 1993, as a result of the conversion to Tracking stock, the market value of the Pittston Company's common stocks had more than doubled.

The company further divided its services stock (which held Brink's, Brink's Home Security, and Burlington Air Express) in 1995 by separating the Services Group into two new common stocks--the Pittston Brink's Group and the Pittston Burlington Group. In the transition Pittston Services Group shares became Pittston Brink's Group Common Stock, and one-half share of Pittston Burlington Group Common Stock was distributed tax-free for every share owned of Pittston Services stock. Many investors were attracted to tracking stocks because they were able to invest in one type of stock, such as Pittston Burlington Group, without worrying about a downturn in another portion of the Pittston business, such as the Pittston Minerals Group.

Close Up of Vignette

Certificate: Common Stock, specimen, late 1900�s

Printer: American Bank Note Company

Dimensions: 8� (h) x 12� (w)

State: VA-Virginia

Subject Matter: Famous Companies | Consumer Products | Service Industry | Specimen Pieces

Vignette Topic(s): Allegorical Featured | Globe Featured

Condition: No fold lines, punch hole cancels in the signature areas and body, very crisp.

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