×

The Copper Country’s first hostile takeover

The last decade of the 19th century began a time of rapid growth and expansion across the Lake Superior District. It also saw a change in corporate behavior. Where once a spirit of mutual cooperation had existed among neighboring mining companies, by the early 1880s a spirit of corporate hostility began to emerge.

When the Quincy Mining Company was organized in 1848, it was the only venture on or near the north shore of Portage Lake. It was soon joined by the Pewabic Mining Company in 1853, the Franklin in 1857, the Mesnard company in 1864, and the organization of the Concord Company, which was opened on land set off by the Franklin company, and would soon be place under the ownership of Pewabic company.

In the early years of Quincy’s operation, it concentrated its efforts – and its money – on what it called the Quincy Lode. The Quincy Lode was poor. So poor, in fact, that the company went broke once, then changed ownership and management. Changes in management did no good to the lack of richness in the lode, however.

The Pewabic Mining Company, on land adjoining the Quincy’s on the north, spent three years poking around until its captains uncovered what came to be called the Pewabic Lode in 1856. Columbus Christopher Douglass, fired from the Lake Superior Mining Company after being accused of stealing, was now Quincy’s agent. Douglass was a cousin to Douglass Houghton, and had served on Houghton’s 1840 State of Michigan geological survey as a geologist. Douglass had discovered the copper vein mined by the Lake Superior Mining Company. He had also discovered the Quincy Lode, which was proving to be of no more value than that being worked by the Lake Superior company at Eagle River.

Douglass traced the Pewabic Lode onto Quincy’s property and opened the Number One shaft just a couple of hundred feet south of the Pewabic/Quincy property line. that same year, it opened the Number Two shaft, and the Quincy was soon paying dividends.

For thirty years, the Quincy and the Pewabic companies enjoyed friendly relations. Quincy’s president, Thomas Fales Mason, was a small minority shareholder in the Pewabic. Nearly all of the Pewabic’s shareholders owned stocks in the Franklin and Concord companies; the Franklin and the Pewabic shared the same management.

All of this changed abruptly in 1883 when the Pewabic’s directors let the company’s state charter lapse that year. The Pewabic Mining Company had been organized under the laws of Michigan, which stated that no corporation, except for municipal purposes, or for the construction of railroads, plank roads, and canals, could exist for a longer period than 30 years.

Mason saw this lapse of the charter as his opportunity to attack the Pewabic company. At the 1884 annual stockholders’ meeting, Mason moved to dissolve the company and place the property on public sale, while the majority of the shareholders decided to form a new company, the Pewabic Copper Company, with each shareholder trading equally share for share from the old company to the new. Those members who chose not opt into the new company could sell their shares to the new company at their face value.

In response to those options, Mason, William Hart Smith, and Sullivan Ballou, filed a suit against the Pewabic Mining Company and in particular, directors Johnson Vivian, Daniel Demmon, and Alden Butterick. The suit was filed in Houghton County Circuit Court on March 31, 1884.

Mason’s arrogance shone through in the complaint, which stated: “at the annual meeting of the stockholders on March 26, 1884, for the election of directors and for other purposes,the following resolutions were adopted against the vote and protests of the complainants.” There were three complainants.

Of the 20,000 shares of capital stock, Mason and his two co-complaintants held a total of 2,650 shares, or just over ten percent of the total.

Vivian and his codefendants replied to the complaint, stating “that the complainants, in refusing to accede to the new arrangement, are acting in the interest of rival copper mining companies, whose mines adjoin that of the Pewabic company, and that their object is to force a sale at public auction, when those companies, whose shareholder are wealthy, will have an unfair advantage in purchasing the property below its real value.”

The “rival companies” were, of course, the Quincy Mining Company, of which Mason was president.

The directors of the Pewabic offered the complainants $75,000 for their shares even though the value of their shares totaled just over $66,000. Mason held out, insisting the property be placed at public auction for a price not exceeding $50,000.

The court appointed a special master, Peter White, to determine the total value of the Pewabic company. When White totaled up the Pewabic Mining Company’s values, including the houses, stamp mill, shafts, machinery, and assets, the total was quite a bit more than Mason’s proposed $50,000. In fact, the number White had come up with was $498,412. 24.

The case finally wound up in the United States Supreme Court. While the court found Mason’s claim that three minor shareholding complainants should have control over the majority – or the company – ridiculous, the court had to base its decision on the laws of the state in which the company had been organized. The Pewabic Mining Company had, in fact – for whatever reason – allowed its thirty-year charter to lapse. The court ruled in favor of Mason.

Mason and Smith finally took possession of the (now former) Pewabic Mining Company’s property March 30, 1891, seven years after they had filed the initial complaint. Mason and Smith, in turn, sold the deed to the property to the Quincy Mining Company for a total of $800,000, which paid them for the property and to reimburse them for their legal fees stemming from the case.

The Quincy Mining Company had succeeded in the Copper Country’s first hostile takeover. But it certainly would not be the only seen in the Copper district in the years to come.

Graham Jaehnig can be reached at gjaehnig@mininggazette.com.

Newsletter

Today's breaking news and more in your inbox

I'm interested in (please check all that apply)
Are you a paying subscriber to the newspaper? *
   

Starting at $4.62/week.

Subscribe Today