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Draft:Marshall Steel Company Limited

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Marshall Steel Company Limited
TypePrivate (1960–1983); publicly traded (1983–1992)
IndustryStructural steel fabrication, erection, and distribution
Founded1960 (1960)
FounderClarence W. Marshall
FateControl acquired by Canadian Erectors Ltd. (1992)
HeadquartersChomedey, Laval, Quebec; Ottawa, Ontario; later Milton, Ontario,
Canada
Key peopleClarence W. Marshall (founder)
W. A. "Wels" Marshall
C. D. "Ken" Marshall
Jeffrey G. Marshall (president, c. 1980–1992)
ProductsStructural steel fabrication, erection, and metal distribution

Marshall Steel Company Limited (French: Acier Marshall Compagnie Limitée) was a Canadian structural steel fabrication, erection, and distribution company based in Chomedey, Laval, Quebec, and Ottawa, Ontario.[1] It was founded by Clarence W. Marshall and subsequently led across two further generations of the Marshall family — his sons W. A. "Wels" Marshall and C. D. "Ken" Marshall, and later Wels's son, Jeffrey G. Marshall. In 1981 the company acquired a majority interest in the much larger public distributor Drummond McCall Inc., briefly operating as Marshall Drummond McCall Inc. in the mid-1980s, before divesting the Drummond McCall operations and continuing as an independent structural-steel fabricator until family control ended in 1992.

Background

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Clarence W. Marshall founded Dominion Reinforcing Steel Co. Ltd. in Ottawa in 1914.[2][3] Dominion Structural Steel Limited (DSS) was incorporated in 1930 to take over the structural-steel business he and W. M. Taylor had run for the previous seven years; Marshall was its board chairman, and his sons W. A. and C. D. Marshall sat on its board.[4] In 1945 Marshall was elected president of the Canadian Institute of Steel Construction.[2][5] On 27 July 1954, Canada Iron Foundries Ltd. offered to purchase the outstanding common shares of DSS for $42 per share, a transaction valued at approximately $4.2 million; DSS's own directors recommended the offer for acceptance.[6] By early August 1954, more than 85 percent of DSS's shares had been tendered and Canada Iron had completed the financing required to pay for them.[7] Under Canada Iron, DSS expanded nationally and, jointly with Dominion Bridge, took the structural-steel contract for the first phase of Place Ville Marie in Montreal, reported at approximately $9 million — then the largest commercial structural-steel contract awarded in Canada.[8] In 1958 Wels Marshall was president of DSS and Ken Marshall its vice-president, when Canada Iron brought three further regional fabricators into the group: Western Bridge & Steel Fabricators of Vancouver, C. W. Carry Ltd. of Edmonton, and Calgary Structural Steel Ltd.[9]

In 1959, the DSS structural-steel division moved into loss. Canada Iron's president, T. F. Rahilly, told shareholders that a small loss had been anticipated for the year but that completing structural-steel projects bid at competitive prices in 1958 produced far larger losses than forecast, compounded by the cost of developing new product lines including industrial cranes, roof decks, and wall panels. DSS's net profit in 1958 had been $2,454,983.[10] Rahilly's letter to shareholders stated that a reorganization of DSS's top-level personnel was already underway.[10] In February 1960 the reorganization was still under way, and DSS was expected to return to profitability by the end of the year despite a construction delay on the Place Ville Marie tower.[11] On 26 May 1960, E. L. Hartley — previously associated with Western Bridge and Steel Fabricators of Vancouver, a firm Canada Iron had acquired in 1958 — was elected president of DSS at its annual meeting.[12]

History

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Founding (1960–1966)

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Clarence W. Marshall formed Marshall Steel Company Limited in Ottawa and Montreal in 1960.[13] By 1961 the company's structural-steel fabricating plant was in the newly created city of Chomedey, north of Montreal.[14][15] Marshall was chairman of the company's board when he died in Ottawa on 27 March 1966.[2][13]

Growth and diversification (1966–1980)

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Following Clarence's death, the company passed to Wels and Ken Marshall. Through the 1970s it developed into an integrated structural-steel business combining fabrication, erection, and metal processing and distribution, operating from plants in Montreal and Toronto.[16]

Jeffrey G. Marshall, son of Wels, joined the company in 1964.[17] He was appointed a director and vice-president of administration in August 1973.[1] By June 1975 he was president of the wholly owned erection subsidiary, Marshall Steel Erectors Canada Ltd.,[18][17] and that September was named executive vice-president of the parent company, with responsibility for all operating and staff functions.[17] He became president of Bomac Steel, a Mississauga structural-steel fabricator that had been absorbed into the Marshall organization, by June 1977, and in the same month was elected a vice-chairman of the Canadian Institute of Steel Construction.[19][20] He became president of Marshall Steel in 1978.[21]

By the start of the 1980s the company had eliminated long-term debt, reduced short-term borrowing, and exceeded its stated 20 percent target return on shareholders' equity for five consecutive years.[16] In June 1980 Jeffrey Marshall became chairman of the Canadian Institute of Steel Construction, the youngest in the institute's history, following his grandfather Clarence Marshall in the post.[22][23] As chairman he spoke publicly on industry conditions, including the effect of the 1981 strike at Algoma Steel.[23][24]

International expansion (1977–1980)

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Domestic construction weakness in the late 1970s pushed the Canadian structural-steel industry toward export markets, helped by the depreciated Canadian dollar, industry efficiency, and federal assistance. Marshall Steel expanded rapidly abroad: where the company had exported only to Bermuda as recently as 1977, by 1979 it held markets in Trinidad, the Ivory Coast, Indonesia, Ecuador, the United States, Argentina, Bangladesh, and Cuba.[25]

In 1979 Marshall Steel was fulfilling a US$45 million contract, in joint venture with Frankel Steel Ltd. of Toronto, for a steel mill in Trinidad. The mill as a whole was valued at approximately US$375 million, with about 245 workers, 55 of them Canadian, engaged in its construction, and completion was expected in the summer of 1980.[21][25]

Acquisition of Drummond McCall (1981–1982)

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Drummond McCall Inc. was a publicly traded Canadian metal distributor founded in Montreal in 1881, headquartered by 1981 in Lachine, Quebec, with annual sales of approximately $223 million and operations across nine provinces and the northeastern United States; its annual sales and total assets were roughly three and a half to four times the size of Marshall Steel.[26][16] In December 1979, Drummond McCall's own management had approached Marshall about a possible merger; Marshall indicated interest in a share exchange rather than a cash transaction, and the discussions ended without result.[16] Roughly two years later, in 1981, Marshall Steel launched a hostile bid for a controlling interest in Drummond McCall.[16] The acquisition was financed primarily through a floating-rate loan from the Toronto-Dominion Bank at approximately prime plus 0.75 percentage points; Canadian bank prime stood at approximately 21 percent at the end of August 1981, against internal projections assuming an average of roughly 14 percent through 1985.[16]

The bid was for $15 a share for 51 percent of Drummond McCall's 3.5 million shares, a transaction valued at approximately $27 million.[26] Drummond's board and management opposed the offer immediately, and the bid was contested across two securities commissions and the Quebec courts.[26]

On 9 October 1981, the Ontario and Quebec securities commissions sat jointly in Montreal to hear Drummond's objection that Marshall, as a private company, had disclosed no financial information by which shareholders could judge its ability to pay.[26] The commissions, with Ontario Securities Commission chairman Henry Knowles present and the ruling delivered by Quebec vice-chairman Roland Côté, imposed a nine-day delay, requiring Marshall to halt purchases until 23 October and mail shareholders fresh information on its financing.[26] Under that requirement, Marshall's lawyer, Michael Richards, produced a letter from a Toronto-Dominion Bank official confirming the bank's financing commitment, and stated the company expected sufficient profits to service the debt at an interest rate of 22 percent without receiving dividends from Drummond.[26]

The first offer closed on 23 October with 39.24 percent of shares tendered (1,378,645 shares) — more than 80 percent of shareholders who responded, but short of the fixed 51 percent Marshall required, which it declined to reduce.[27] Marshall announced a renewed offer at the same price on 26 October,[27] but four days later Mr. Justice Kenneth Mackay of the Quebec Superior Court granted an interim injunction returning the tendered shares, collapsing the renewal; a same-day appeal to Mr. Justice Rodolphe Paré of the Quebec Court of Appeal was declined on jurisdictional grounds.[28] Marshall separately obtained a court order compelling Royal Trust to produce a current shareholders' list it had twice refused to provide to the company's chief financial officer, Malcolm Loucks.[28]

Marshall relaunched the offer with a minimum of 45 percent and a maximum of 51 percent, at the same $15 price.[28] It closed on 24 November 1981 with approximately 95 percent of Drummond McCall's shares tendered, and Marshall took up 51 percent.[29] Drummond McCall's roughly $223 million in annual sales ranked it Canada's 241st-largest company at the time; Marshall Steel's own sales were expected to reach approximately $70 million that year.[29] Derek A. Drummond became chairman of the combined board, with five existing directors remaining, and Jeffrey Marshall took over as president of Drummond McCall in place of D. T. Bourke, who left along with executive vice-president Kenneth Robertson.[30]

Drummond McCall's own 1981 annual report described the year as one of the most dramatic and demanding periods in its corporate history: annual sales rose from about $223.5 million to $274.7 million while earnings fell from about $3.9 million to $430,000, with a fourth-quarter loss of approximately $1.7 million.[31]

Recession and restructuring (1982–1983)

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The 1982 Canadian metals-industry recession caused a sharp deterioration in the combined companies' results. Drummond McCall's 1982 sales fell approximately 27 percent to about $200 million, with a net loss of approximately $10.7 million.[32] Jeffrey Marshall described the market that year as showing "one hell of a lot of distress sales."[33] Management responded with a restructuring program: warehouse space was reduced from approximately 1.4 million to 900,000 square feet, inventory was cut about 36 percent, and short-term bank debt was cut roughly 64 percent.[32] By late 1983 Jeffrey Marshall told reporters that "business has significantly improved."[34]

Marshall Drummond McCall Inc. and divestiture (1983–1988)

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In late 1983, Drummond McCall acquired Marshall Steel's operating assets in exchange for shares, raising Marshall's ownership stake to approximately 60 percent.[35] The combined company later took the name Marshall Drummond McCall Inc.[36]

In February 1987, shareholders approved the sale of the Drummond McCall metal service-centre operations to Federal Industries Ltd.. of Winnipeg for approximately $110 million, and the corporate name reverted to Marshall Steel Limited.[36][37] The Financial Post attributed the company's difficulties to the timing of the debt-financed 1981 takeover, and reported that the synergies Marshall had expected from combining the two businesses never materialized because of their very different corporate cultures.[37] The transaction eliminated the company's debt and returned it to a smaller, more concentrated structural-steel operation.[36] Marshall Steel then sought to take the surplus in the Drummond McCall pension fund, which the United Steelworkers contested; in 1991 the two sides agreed, without going to court, to split the $5.7 million surplus, with two-thirds going to employees.[38]

Renewed expansion (1988–1991)

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Within fifteen months, Marshall Steel had resumed expansion.[39] In 1988 the company purchased the former Frankel Steel fabricating plant in Milton, Ontario, for $6.8 million, selling its smaller Mississauga site for $5.9 million, and opened new United States distribution centres in Atlanta and Palmer, Massachusetts.[40] The company reported 1987 operating profit of $2.7 million (lifted to $15.3 million including a $12.6 million gain on the Drummond McCall sale), and projected 1988 sales of approximately $150 million against $104.5 million the previous year.[40] Contracts from this period include a $24 million structural-steel contract for General Motors of Canada's paint shop at Sainte-Thérèse, Quebec, completed in 1988.[40]

Sale and end of family ownership (1992)

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In 1990 Jeffrey Marshall warned that the high Canadian dollar had effectively closed the U.S. market to Canadian structural-steel fabricators, and that high interest rates and a construction slump would bring a severe recession to the industry.[41] Marshall Steel ended 1991 with a loss amid a restructuring, and its losses continued into 1992.[42] In early April 1992 the Toronto-Dominion Bank seized the Marshall family's 62 percent stake after the family holding company, Marshall DMC Holdings Inc., defaulted on a loan. In May the bank sold the control block for $6.5 million to CEL Marshares Inc., a subsidiary of Canadian Erectors Ltd.[43][42] Wels and Ken Marshall resigned as directors, and Jeffrey Marshall, the company's president and majority shareholder, left at the time of the sale.[43][44]

Aftermath

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In 1994 Wels and Ken Marshall sued the company to recover retirement benefits, and Jeffrey Marshall sued for wrongful dismissal and lost retirement benefits, claiming $3.7 million in damages. The company said it would contest the claims.[44]

See also

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References

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  1. 1 2 "Marshall Steel Company Limited", appointment notice, The Montreal Star, 20 August 1973, p. 10, via Newspapers.com.
  2. 1 2 3 "Clarence W. Marshall", The Montreal Star, 28 March 1966, p. 20, via Newspapers.com.
  3. ↑ "Marshall Steel Founder Dies", Canadian Press, The Standard (St. Catharines), 28 March 1966, p. 32, via Newspapers.com.
  4. ↑ "Dom. Structural Steel's Bonds, Stock Offered", Financial Post, 16 December 1950, p. 9, via Newspapers.com.
  5. ↑ "Marshall is President of Steel Fabricators", Financial Post, 16 June 1945, p. 3, via Newspapers.com.
  6. ↑ "Can. Iron Offers Dom. Structural $42 Per Share", The Globe and Mail, 27 July 1954, p. 20, via Newspapers.com.
  7. ↑ "Financing Completed in Iron Foundry Deal", The Montreal Star, 5 August 1954, p. 28, via Newspapers.com.
  8. ↑ "Commercial Steel Contract Biggest", The Toronto Star, 4 December 1958, p. 14, via Newspapers.com.
  9. ↑ "New Structural Steel Fabricating Group", Financial Post, 5 July 1958, p. 16, via Newspapers.com.
  10. 1 2 "Drop in Structural Steel Sales To Cut Profit of Canada Iron", Financial Post, 28 November 1959, p. 22, via Newspapers.com.
  11. ↑ "Canada Iron Profit Slump Predicted", The Toronto Telegram, 3 February 1960, p. 18, via Newspapers.com.
  12. ↑ "Dominion Structural Steel Appointment", The Montreal Star, 26 May 1960, p. 56, via Newspapers.com.
  13. 1 2 "C. W. Marshall", The Gazette (Montreal), 28 March 1966, p. 47, via Newspapers.com.
  14. ↑ Marshall Steel Ltd. advertisement, The Montreal Star, 26 May 1961, p. 48, via Newspapers.com.
  15. ↑ Marshall Steel Co. advertisement, The Montreal Star, 27 August 1964, p. 51, via Newspapers.com.
  16. 1 2 3 4 5 6 Laurie Dunk (under the supervision of David C. Shaw), Marshall Steel Ltd., case 9A82B015, Richard Ivey School of Business, University of Western Ontario, 1982.
  17. 1 2 3 "Marshall Steel Company Limited appointments", The Gazette (Montreal), 9 September 1975, p. 35, via Newspapers.com.
  18. ↑ "Marshall Steel Erectors Canada Ltd. appointment", The Gazette (Montreal), 20 June 1975, p. 23, via Newspapers.com.
  19. ↑ "Bomac Steel Company Limited", appointment notice, The Globe and Mail, 8 June 1977, p. 23, via Newspapers.com.
  20. ↑ "Re-elected head of steel institute", Canadian Press, The Standard (St. Catharines), 11 June 1977, p. 8, via Newspapers.com.
  21. 1 2 Boris Miskew, "Steel makers winning export sales", The Montreal Star, 23 May 1979, p. 59, via Newspapers.com.
  22. ↑ Jennifer Grass, "Steel fabricators want action on energy projects", Financial Post, 7 June 1980, p. 12, via Newspapers.com.
  23. 1 2 Carey French, "CISC chief warns Ottawa on timing of energy jobs", The Globe and Mail, 12 July 1980, p. B16, via Newspapers.com.
  24. ↑ Virginia Galt, "Steel institute optimistic over Algoma settlement", The Globe and Mail, 5 August 1981, p. B2, via Newspapers.com.
  25. 1 2 "Foreign markets buoy structural steel firms", Canadian Press, The Globe and Mail, 26 May 1979, p. B14, via Newspapers.com.
  26. 1 2 3 4 5 6 John Saunders, "Drummond wins delay of offer", The Gazette (Montreal), 10 October 1981, p. 89, via Newspapers.com.
  27. 1 2 Jan Ravensbergen, "Marshall to renew bid for Drummond", The Gazette (Montreal), 27 October 1981, p. 52, via Newspapers.com.
  28. 1 2 3 Jan Ravensbergen, "Marshall must launch new offer as Drummond wins court victory", The Gazette (Montreal), 31 October 1981, p. 86, via Newspapers.com.
  29. 1 2 Jay Bryan, "Marshall succeeds in its bid for rival", The Gazette (Montreal), 25 November 1981, p. 41, via Newspapers.com.
  30. ↑ Robert Gibbens, "Marshall Steel's plans for Drummond are consolidation, emphasis on profit", The Globe and Mail, 10 December 1981, p. B8, via Newspapers.com.
  31. ↑ 1981 Annual Report, Drummond McCall Inc., via McGill University Library.
  32. 1 2 Robert Gibbens, "Metals industry may have bottomed out", The Globe and Mail, 26 March 1983, p. B1, via Newspapers.com.
  33. ↑ Dan Westell, "Smaller steel firms discounting widely", The Globe and Mail, 28 September 1982, p. B1, via Newspapers.com.
  34. ↑ Dan Westell, "Parent's assets, restructuring enhance Drummond fortunes", The Globe and Mail, 20 December 1983, p. B9, via Newspapers.com.
  35. ↑ Dan Westell, "Steel firms are stronger after mergers", The Globe and Mail, 20 December 1983, p. B1, via Newspapers.com.
  36. 1 2 3 Harvey Enchin, "Asset sale places Marshall in lower ranks", The Globe and Mail, 10 February 1987, p. B8, via Newspapers.com.
  37. 1 2 Mathew Horsman, "Sale gives Marshall Steel clean slate", Financial Post, 16 February 1987, p. 11, via Newspapers.com.
  38. ↑ "Splitting pension surplus brings windfall for workers", Canadian Press, Waterloo Region Record, 2 March 1991, p. 14, via Newspapers.com.
  39. ↑ Craig Toomey, "Marshall Steel chief forecasts growth", The Gazette (Montreal), 5 May 1988, p. C5, via Newspapers.com.
  40. 1 2 3 Harvey Enchin, "Marshall steels self for expansion into structural major leagues", The Globe and Mail, 5 May 1988, p. B21, via Newspapers.com.
  41. ↑ "Buck, rates threaten steelmakers", The Hamilton Spectator, 10 May 1990, p. A1, via Newspapers.com.
  42. 1 2 Oscar Rojo, "Marshall Steel's control shifts, triggers changes", The Toronto Star, 23 May 1992, p. 22, via Newspapers.com.
  43. 1 2 Marian Stinson, "TD sells control of Marshall Steel", The Globe and Mail, 23 May 1992, p. B5, via Newspapers.com.
  44. 1 2 Oliver Bertin, "Ex-officers of Marshall Steel sue for retirement benefits", The Globe and Mail, 28 January 1994, via Newspapers.com.
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