A complicated series of corporate events took place between 1908 and 1910 that resulted in a lawsuit between a rebranded Sanitas and Will Kellogg Company (NYSE:K)’s cereal company over the use of the Kellogg name. The outcome was decided in Will Kellogg Company (NYSE:K)’s favor with a licensing agreement, but Dr. Kellogg was not satisfied. He would file suit again in 1920 for the same reasons, and it would be rejected largely on the basis of the earlier licensing agreement.
Will Kellogg gained exclusive use of the Kellogg name to market cereal, and the Kellogg Company (NYSE:K)Toasted Corn Flake Company was cleared for success on the back of a bold marketing strategy. Sanitas, Dr. Kellogg’s cereal company, would soon vanish, as would many copycats that failed to make marketing a cornerstone of their competitive strategy.
British leadership for Middle Eastern oil exploration
The Anglo-Persian Oil Company was established on April 14, 1909, following the discovery of oil in modern-day Iran in 1908. Eight years of work and more than 500,000 British pounds had been sunk into exploring the Iranian desert before a gusher spouted into the sky, narrowly averting the total financial failure of William D’Arcy and the Burmah Oil Company. The formerly wealthy D’Arcy and the diminished Burmah Oil negotiated with many other parties for months over the best way to pursue their find, leading at last to the creation of Anglo-Persian Oil nearly a full year after the gusher had been tapped.
Created with an initial capitalization of 2 million British pounds (equal to about $250 million today), Anglo-Persian Oil quickly turned into a popular stock on the London markets. It became both a key supplier of the British Navy and majority-owned by the British government in 1914, thanks in large part to the modernization efforts of future Prime Minister Winston Churchill, who commanded the Navy at that time.
The British government held a majority of the company’s shares until 1967. By the end of World War I, Anglo-Persian was earning 2.65 million British pounds of profit per year (equal to $305 million in present value) on more than 1.1 million tons of Iranian oil production. Production doubled in only two years, but the glut of oil kept prices depressed, and Anglo-Persian didn’t approach a doubling of its postwar profits until 1927.
By the time the British government lost its controlling interest, Anglo-Persian had undergone two name changes, one of which you know better than the other. It became Anglo-Iranian Oil in 1935 after a contentious renegotiation of terms with a new regime that had renamed the country, and it changed again to British Petroleum in 1954, after a 1951 military coup led to a brief nationalization of its assets.
At the time of nationalization it operated a fleet 140 oil tankers, but these ships proved unnecessary once the company lost access to Iranian fields. BP plc (ADR) (NYSE:BP) returned to Iran in 1954 with a multinational agreement that granted it a 40% stake in Iranian oil production, the profits of which would be split 50/50 with the Iranian government. This pact would last until the country’s 1979 Islamic Revolution, at which point all foreign oil assets were seized and BP found itself shut out of the country for which it was originally created.
Today, BP is a far-flung multinational oil company, with operations in more than 80 countries that produce about 3.3 million barrels of oil equivalent per day. However, had it never lost its early control of Iran’s oil production, BP would probably be much larger, even without its global operations — the Iranian national oil company produces about 6.4 million barrels of oil per day.
Consolidation takes wing
Delta Air Lines, Inc. (NYSE:DAL) proposed a $3.1 billion acquisition of Northwest Airlines on April 14, 2008. The long-awaited deal, proposed during a time of great stress for the airline industry, would combine the nation’s third-largest and fifth-largest carriers into the world’s largest airlines, with nine primary hubs serving more than 390 airports in 67 countries. Together, Delta Air Lines, Inc. (NYSE:DAL) and Northwest were projected to earn $35 billion in annual revenue while flying more than 800 airplanes.
By the fall of 2008, all regulatory and shareholder hurdles had been passed, and the new Delta Air Lines, Inc. (NYSE:DAL) began operating as a single carrier by the end of 2009. The two carriers’ integration, however, has been far from flawless. Efforts were under way well into 2011 to unify contracts, repaint airplanes, combine processes, and merge computer systems — some of which dated to the 1960s. Delta Air Lines, Inc. (NYSE:DAL) executive Peter Wilander offered The New York Times a brilliant and pithy Biblical comparison: “It’s like Noah’s ark out here … we had two of everything.”
The article Collapse, Consolidation, and Accidental Greatness originally appeared on Fool.com is written by Alex Planes.
Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter, @TMFBiggles, for more insight into markets, history, and technology.The Motley Fool has no position in any of the stocks mentioned.
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