Insurance Company of North America,“ the oldest American stock fire and marine life insurance company” in the United States, founded in Philadelphia in 1792. Its acquisition of Blyth reflected its desire to diversify into the financial services business, which was a relatively unfamiliar area for the firm’ s management. INA’ s chairman and CEO was John T. Gurash, an Oakland native, who spent the majority of his career in the insurance industry. At the time of the merger, Gurash stated,“ This move emphasizes INA’ s plans to engage in the financial services business on a truly sophisticated basis.”
As a result of the merger, Blyth found itself at the center of an ongoing controversy at the NYSE regarding the public ownership of brokerage firms. Blyth had rejoined the NYSE in 1965, but because NYSE’ s rules prohibited“ public ownership of member firms,” Blyth & Co. had to resign as a result of the INA acquisition. After the merger, Blyth & Co. recorded two years of deficits, which was attributed to losing its membership in the NYSE. The firm also continued to experience turnover at the executive level. By 1972, INA“[ lost ] confidence in and [ was ] apparently dissatisfied with its investment in Blyth.” It decided to merge“ its Blyth subsidiary with another investment firm, Eastman Dillon, Union Securities Co., to form Blyth Eastman Dillon & Co. Inc.”
Blyth Eastman Dillon & Co., Inc.( 1972)
Eastman Dillon, Union Securities was itself the result of a 1956 merger between Eastman Dillon, a Philadelphia investment banking house founded in 1912, and Union Securities, the investment company of private bank J & W Seligman & Co., founded in 1939. Like Blyth & Co., Eastman Dillon, Union Securities believed the merger would help them“ achieve economies of scale” in order to reduce overhead costs and take advantage of the capital by institutional investors. In July 1974, Blyth Eastman Dillon“ closed 10 of its 55 offices,” including six offices in California. Two months later, it closed eight more.
Changes were also made at the executive level. At the time of the merger, Willard S.
Prospectus for the Ford Motor Company IPO, showing 10,200,000 shares at a value of $ 5 each. Blyth & Co. Inc. is listed first as the lead underwriter.
Boothby, Jr., a Philadelphia native and Lehigh graduate, who was the president of Eastman Dillon, became president and CEO of the newly-combined firm. Paul Conley, a Chicago native and Loyola University graduate, who had started at the Blyth Chicago office in 1934, was named chairman. Frank L. Mansell, a University of Nebraska and Harvard Business School graduate, who was with Lee Higginson Corporation before going to Blyth in 1952, became vice chairman. Then, in 1974, James F. Cleary, who had been with Eastman Dillon Union Securities since 1951, took over as president and COO. Conley retired that year. Boothby took his place as chairman. With the exception of Mansell, by the early 1970s, the leaders of the Blyth firm were all former members of Eastman Dillon.
In 1975, a change in leadership also took place at Blyth Eastman Dillon’ s parent company. That year, Ralph S. Saul, the former co-chief executive of First Boston Corporation and former president of the American Stock Exchange, became chairman and CEO of INA Corporation. Born in Brooklyn, Saul graduated from the University of Chicago and Yale Law. He later said that when he joined the firm,“ INA needed to be turned around. It needed waking up.” In 1978, Saul recruited Alvin V. Shoemaker, a Wharton and University of Michigan law graduate, from First Boston to be president and chairman of the operating committee.
Blyth Eastman Paine Webber( 1980)
Since 1973, rumors had circulated that Blyth Eastman Dillon was considering a merger with Paine Webber, Jackson Curtis, Inc., the brokerage unit of Paine Webber, Inc.,“ one of Wall Street’ s largest brokerage and investment-banking firms.” At the time, INA and Paine Webber’ s chairman and CEO, James W. Davant, denied those rumors. But in 1979, with Blyth Eastman Dillon still incurring quarterly losses, INA Corporation decided“ to sell its interest in Blyth Eastman Dillon,” making Paine Webber Inc. the majority partner of a newly-named firm: Blyth Eastman Paine Webber.
By merging with Blyth Eastman Dillon, Davant had hoped to put“ Paine Webber on par with the biggest Wall Street players.” Unfortunately, the merger did not end well. Paine Webber experienced
“ massive operational problems” that stemmed from issues in reconciling Blyth Eastman Dillon and Paine Webber’ s processing systems. These problems led not only to a SEC censure, but also to significant financial losses.
The company’ s troubles were exacerbated by another round of personnel defections that had happened very soon after the merger. According to The New York Times,“ when the firm’ s top executives found out that the company was sold from under them, they were outraged. An enormous talent drain followed.”
Mansell continued as chairman and chief executive of the new Blyth Eastman Paine Webber, but Boothby, the chairman of Blyth Eastman Dillon, retired in 1980. In 1981, Shoemaker returned to First Boston to become chairman of the executive committee. Davant stepped down as chief executive of Paine Webber, Inc. in 1980 and as chairman in 1981.
Davant’ s replacement was Donald B. Marron, a New York native and graduate of the City University of New York, who had joined Paine Webber Inc. after selling“ his former firm, Mitchell Hutchins, to Paine Webber in 1977.” Under Marron’ s leadership as chairman and CEO, the firm responded to the operational crisis by cleaning“ up its back office and [ cutting ] expenses by chopping its work force by hundreds.”
The reorganization continued in 1984 when Paine Webber merged“ three major operating subsidiaries— Paine, Webber, Jackson & Curtis; Paine Webber Mitchell Hutchins and Blyth Eastman Paine Webber … into one operating subsidiary, to be called Paine Webber,” later called Paine Webber Group. At that time, Blyth’ s name was erased from the company, and the history of the bank came to an end.
Susie J. Pak is an Associate Professor in the Department of History at St. John’ s University( New York). A graduate of Dartmouth College and Cornell University, she is the author of Gentlemen Bankers: The World of J. P. Morgan( Harvard University Press), a Trustee of the Business History Conference, co-chair of the Columbia University Economic History Seminar and a member of the editorial advisory board of the Business History Review. She is also a member of the Financial History editorial board.
www. MoAF. org | Winter 2018 | FINANCIAL HISTORY 17