Design for Making Money

It would be hard to find three more dissimilar business associates than Bror Dahlberg, Walter S. Mack Jr. and Wallace Groves. Mr. Dahlberg is a smoothfaced, vigorous Swede of 58 who collects Napoleonana, has an ornate office almost as big as Hitler's, runs his business with cosmic scope. Mr. Mack is a relaxed Harvardman with intense blue eyes and nonchalance about money; he likes to consider himself a sort of clinicist for big business. Mr. Groves is a bald, shy Southerner whose financial talents have earned him several million dollars, a reputation as "silent man of Wall Street," and one Federal indictment for fraud and conspiracy.

The marriage of Messrs. Dahlberg, Mack and Groves was made in Wall Street, not in Heaven, but it works surpassingly well. Last week's announcement of the approaching sale, largely in Europe, of 100,000 common shares of Celotex Corp. called attention to their successful venture in corporate resuscitation.

Celotex was Bror Dahlberg's creation. In 1911, having been everything from a high-speed typist to freight-rate counselor, he found himself vice president of Minnesota & Ontario Paper Co. One of its by-products was a rigid insulating board called Insulite. Dahlberg, several M. & 0. associates and Insulite's inventor, one Carl Muench, next devised a similar board made out of bagasse, the fibrous residue of chewed-up sugarcane, named it Celotex and began making it commercially in 1921. By 1929 annual sales of their brown insulating board had reached $1,479,000 and President Dahlberg was rich.

But instead of diversifying Celotex's product, he took a flier in sugar, bought up swamps and plantations in Florida and Louisiana. Depression took the Florida properties and in 1932 Mr. Dahlberg's Celotex went into receivership. At this point, looking far from Napoleonic, Bror Dahlberg met quiet Wallace Groves.

Talented Financier Groves had popped up in Wall Street with some money he made in Baltimore, pieced together a few wobbly investment trusts under the name of Equity Corp. and sold them to David Milton, son-in-law of John D. Rockefeller Jr., for a neat profit of $750,000. After that, he bought control of Phoenix Securities Corp., an inconspicuous investment trust then worth some $4,000,000, lured young Walter Mack Jr. away from Equity Corp. to help him run it. Financier Mack comes of a wealthy family, was 1917 at Harvard, operated a cotton mill for a while, married a granddaughter of Adolph Lewisohn, eventually developed a penchant for politics and financial reorganizations.

Mack and Groves had a new idea for Phoenix. Instead of buying up good investments at bargain prices in the manner of Floyd Odium's Atlas Corp., they would buy up ailing or bankrupt industries cheap, cure them and sell them high. Celotex looked good to them and in 1934 they acquired common stock control.

Celotex came back fast. This time President Dahlberg's Napoleonic ambitions were put to more constructive use--diversifying Celotex's products to give it a general line of building materials. It made $736,000 in 1936, $1,267,000 in 1937. This is still cottage size next to the manorial 1937 profits of its two biggest competitors, Johns-Manville Corp ($5,450,000) and U. S. Gypsum Co. ($5,420,000).

All three are belatedly promoting mass production in the technologically backward building industry, establishing in their lines so many of the individual parts of a house that they will eventually be able to supply whole houses on order. Celotex has developed its original insulating board into dozens of types of flooring, sheathing, wallboard. Last year it bought working control of Certainteed Products Corp., giving it roofing, plaster and paperboard products. The forthcoming sale of 100,000 shares of stock will give it enough money not only to retire bank loans of $450,000 but to buy full control of American Gypsum Co., which does about 5% of the U. S. plaster business.

With a building boomlet on the horizon, Celotex is the most up & coming convalescent in Phoenix's clinic. Messrs. Groves and Mack are also making money curing once-famed United Cigar-Whelan Stores Corp., Loft, Inc., and others. In the five years they have been running their clinic, its assets have climbed from $4,000,000 to $6,700,000. Chairman Groves owns the bulk of it, but President Mack may soon be left to rule it alone. For Wallace Groves presently goes to trial under a 15-count Federal indictment of conspiracy and fraud by mail (not involving Celotex or Phoenix Securities).* Maximum sentence if convicted (he has pleaded not guilty): 72 years.

-Sample charge: that when a company run by a Groves crony, General Investment Corp., in 1936 refused to buy 20,000 shares of its own preferred stock for $87.50 a share, Groves himself agreed to buy it and did, but not until he had resold it to General Investment Corp. for $102 a share.

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