American Cyanamid

One Cyanamid Plaza
Wayne, New Jersey 07470
U.S.A.
(201) 831-2000

Public Company
Incorporated: July 22, 1907
Employees: 36,432
Sales: $3.816 billion
Market value: $4.478 billion
Stock Index: New York London Basle Amsterdam Frankfurt Geneva Lausanne Zurich

When William Bell became president of American Cyanamid in 1922, he is reported to have said “even a fool could see what we need is diversification.” Thus began a prolonged program of diversification. Once only a manufacturer of fertilizer, American Cyanamid now makes products as different as Pine Sol cleaner and L’Air du Temps perfume.

American Cyanamid was founded in 1907 by Frank Washburn, a Cornell-educated civil engineer. Cyanamid is a compound of lime, carbide and nitrogen that is suitable for use in fertilizer. Washburn had been a consultant to a nitrate operation in Chile, and had also built three dams in the southern United States. Intent on discovering new industrial uses for hydro-electric power, he saw the perfect opportunity in a revolutionary new way of extracting nitrogen from the air through use of an electric arc. He bought the North American rights to this process, as well as the rights to a new method of binding nitrogen, carbide and lime.

For Washburn, the beauty of these new methods of producing cyanamid lay in the fact that they required large amounts of electricity. He had originally planned to build his first plant and the dam it would require in Alabama, but his hydro-electric project became “a political football,” so to speak. For this reason, the first Cyanamid facility was built in Ontario, Canada, its power supplied by Niagra Falls.

The first carload of cyanamid rolled out of the plant on December 4, 1909. After seven years of producing only this carbide, nitrogen and lime mixture, Washburn traded holdings in American Cyanamid for stock in Ammo-Phos, a company owned by James Duke (of Duke University). This arrangement provided American Cyanamid with an inexpensive supply of phosphoric acid. Phosphoric acid, combined with the nitrogen in cyanamid, produces ammonium phosphate, a good plant food.

The demand for American Cyanamid’s products came almost exclusively from those people engaged in producing agricultural products. In the deflation that followed World War I farmers were especially affected, and with them, American Cyanamid. The once busy Ontario plant began to operate at 14% of its former capacity. Washburn became seriously ill in 1921 and died the following year. His successor, a Quaker and lawyer named William Bell, did not have an easy job ahead of him.

When Bell became head of American Cyanamid in 1922, the company had two principal raw materials: calcium cyanamid and phosphate rock, which were combined to form products for use in agriculture. The challenge for Bell was to find uses for these materials in less cyclical industries. Fortunately for American Cyanamid, while the economic aftermath of World War I had reduced the demand for fertilizers, it had increased the demand for cyanide, which had formerly been supplied by Germany. At the time, cyanide was principally used in the extraction of gold and silver from their ores. American Cyanamid began to manufacture cyanide from cyanamid, thereby broadening its market by supplying mining companies with a necessary chemical. The company also started to produce hydrocyanic acid, an important ingredient in the vulcanization of rubber.

By the mid 1920’s American Cyanamid’s expansion of its line of products, along with a revival in the fertilizer industry, put the company in a position to grow even larger. In the first three or four years of Bell’s leadership the company had pursued a conservative policy of vertical diversification, that is, it concentrated on finding new markets for the same basic material, cyanamid. However, during the years of the 1920’s, with a general improvement in the economy, and an increase in the value of American Cyanamid’s securities in particular, the company embarked on a slightly more aggressive plan of diversification. American Cyanamid, a public company, began to exchange its common stock for holdings in other companies. Some of the first companies acquired in this way were Kalbfleish (heavy chemicals,) Selden (sulfuric acid) and Calco (dyes.) In retrospect, Lederle Labs, acquired in 1930, was the company’s most important acquisition.

The period between the post war deflation and the crash of the U.S. stock market in 1929 was a time of expansion for many companies. American Cyanamid, with a total of 30 subsidiaries, was one of the most diversified companies in the chemical industry. Chemical companies as a whole weathered the Depression well in comparison with other businesses. In the mid-1930’s, direct sales to consumers (drugs, plastics) helped to offset the sharp decline in the industrial demand for American Cyanamid’s products.

With the onset of World War II American Cyanamid’s fortunes improved considerably. The war cut off trade between American companies and their European suppliers so American Cyanamid enjoyed an expanded domestic market. The bulk of their business, however, was from the government. American Cyanamid’s most important contributions to the war effort came from their pharmaceutical division which supplied typhus vaccine, gangrene anti-toxin and dried blood plasma to the armed forces. A subsidiary, Davis and Geck, was a major supplier of surgical sutures.

American Cyanamid received its share of commendations for its part in the war effort; however, questions were raised about the size of the company’s financial rewards. In 1942 the parent company was charged with a violation of anti-trust laws and fined $453,461.00, a large fine considering that American Cyanamid’s net profit for the previous year was $5,666,901.00. Mr. Bell, writing in the company’s annual report, was understandly reticent about the affair, but he did hint that Calco (a subsidiary which produced dyes) was involved, and that a member of the board of directors had been indicted.

The company had a good year in 1950 when its sales increased from $237 million to $322 million. This increase in sales was largely due to a series of breakthroughs made by Lederle Labs. In 1947 Lederle researchers had succeeded in synthesizing vitamin B. In 1948 they discovered Aureomayacin, an antibiotic that was used to treat pneumonia. By 1953 they were producing tetracycline, one of the first broad-spectrum antibiotics. An oral polio vaccine went on the market in 1954. The demand for Lederle’s vaccines and antibiotics was such that new plants were built to keep up with the demand, both at home and abroad. In 1957, for instance, plants to manufacture Lederle’s antibiotics were built in England, Brazil and Argentina. Growth was slow during the 1950’s for many of Cyanamid’s products, and overseas pharmaceutical sales were important to the company’s financial stability. At times Lederle accounted for almost half of the company’s profits.

During the 1950’s the leadership of American Cyanamid changed four times. William Bell died in 1950 and his replacement, a Mr. Gaugler, died within the year. Kenneth Towe succeeded Gaugler, but in 1957 switched places with Mr. Allegaert, who had been chairman of the board. While the top executives were busy swtiching places, the workers were frequently on strike. There were four work stoppages in 1954 alone.

In the early 1960’s American Cyanamid received increased attention from the press for its new corporate headquarters in Wayne, New Jersey. The company was, and is, decentralized. Its major divisions are scattered around New York, New Jersey and Connecticut, and it has subsidiaries in 27 countries at last count. Industry analysts have remarked, however, on the remarkable coordination that exists within the company.

The company is run by the management-finance team, which consists of the president and the four executive vice-presidents. These five managers control the capital expenditures of each department. Siverd, president during the 1960’s summed up company fiscal policy at that time when he said “we can’t have managers running wild with capital.”

The 1960’s was not a particularly good decade for American Cyanamid. The chemical industry as a whole was not performing well. In 1967 American Cyanamid suffered a major setback with its conviction for restraint of trade. Along with Pfizer and Bristol-Myers, American Cyanamid was accused of conspiring to monopolize the marketing and manufacturing of tetracycline from 1953 to 1961. The 81 treble damage suits the company had to contend with in 1967 “hung over American Cyanamid like a sword of Damocles” according to Siverd, who became president in 1969. The company finally settled for $48.5 million, which represented more than 50% of the net profit for that year.

Despite its legal difficulties and conservative fiscal policies, the decade had some bright spots. One of the company’s strengths has always been the Research Coordinating Committee, which makes sure that research is shared among different divisions. In the 1960’s, part of the formula for Breck hair conditioner was discovered in the textile labs, while the chemical basis for an anti-tuberculosis drug was discovered by chemists working on products for the rubber industry.

For American Cyanamid, the 1970’s began with a slump in profits. Industrial sales were down, in part due to a series of prolonged strikes in the rubber and automobile industries. As petroleum companies diversified into chemicals, an overcrowded market developed which depressed chemical prices at a time when inflation was increasing operating expenses.

During the 1970’s Lederle continued to carry the company. Its six cent return on the dollar was not impressive however, when other pharmaceutical companies enjoyed a return of over 15 cents. The consumer products division, which had a number of lucrative brands, began to lose a portion of its market share. The best-selling Breck Shampoo was overtaken by Johnson’s Baby Shampoo and Prell; Davis and Geck had once led the market in sutures, but now it was second to Johnson and Johnson.

The company was also affected by unfavorable publicity from labor disputes and environmental abuses. In 1973 the Georgia State Water Quality Control Board forced Cyanamid to stop killing fish by dumping sulfuric acid in the Wilmington and Savannah rivers. When workers at the Bound Brook, New Jersey plant charged in 1978 that employee health was being compromised by exposure to carcinogens, they found management unsympathetic. 1,300 workers decided to strike in order to protest health hazards at the plant only to be told by plant manager Eldon Knape that, “we don’t run a health spa.” When the company decided that exposure to lead compounds at the Willow Island, Virginia pigments plant might cause birth defects, women of child-bearing age in the plant were ordered to quit, accept demotion or be sterilized. A large amount of adverse publicity resulted from this last incident, after five women admitted to having themselves sterilized in order to keep their jobs.

Whereas the strategy of American Cyanamid had once been to diversify, the strategy of the 1980’s has been to eliminate unprofitable product lines. Current president George Sella has sold the Formica and titanium divisions because their markets were too cyclical. The fertilizer division may be sold because it is also subject to periodic downturns. Another problem with the fertilizer division is that American Cyanamid cannot extricate itself from an expensive phosphate contract, and is purchasing that commodity at a price well above what other fertilizer companies must pay.

Sella is pinning the firm’s hopes on a higher research budget. The increase in research and development began in 1979 and is beginning to show results. For example, Lederle Labs has a promising new anti-cancer drug, Novantrone, on the market in Europe and its approval for the United States is imminent. Lederle Labs still accounts for a major portion, nearly 44%, of Cyanamid’s earnings.

The company’s future is bright enough to make it an attractive candidate for a takeover bid. To guard against this, the company is building up large cash reserves and has rewritten the company by laws to make a takeover more difficult. Should a serious attempt threaten the company, industry analysts say that the consumer products division might be sold to buy back shares in a new Cyanamid.

In the coming years American Cyanamid will be facing more foreign competition in its domestic and international chemical markets, and will have to weather yet another downturn in the fertilizer industry. Cyanamid will probably follow the industry wide trend to concentrate on consumer products, pesticides and specialty chemicals. If the company continues to invest in research and avoids the illegal activities that have proven costly in the past, this corporation will maintain its good standing in the worldwide chemical industry.

Principal Subsidiaries

Acufex Microsurgical, Inc.; Cyanamid Inter-American Corp.; Cyanamid International Corp.; Cyanamid Metals Corp.; Cyanamid International Sales Corp.; Cyanamid Overseas Corp.; Davis & Geck, Inc.; Glendale Protective Technologies, Inc.; Jacqueline Cochran, Inc.; Lederle Parenterals, Inc.; Lederle Piperacillin, Inc.; La Prairie, Inc.; Shulton, Inc.; Toiletries, Inc. The company also lists subsidiaries in the following countries: Australia, Bermuda, Brazil, Canada, Costa Rica, France, India, Italy, Japan, Korea, Mexico, The Netherlands, Netherlands Antilles, Pakistan, Peru, Philippines, Portugal, Switzerland, United Kingdom, Venezuela, and West Germany.