M. A. Hanna Company
M. A. Hanna Company
M. A. Hanna Company
Sales: $1.33 billion
Stock Exchanges: New York Midwest
SICs: 2821 Plastics Materials & Resins; 2891 Adhesives & Sealants; 3087 Custom Compounding of Purchased Plastics Resins; 2952 Asphalt Felts and Coatings; 3069 Fabricated Rubber Products, Nec; 2865 Cyclic Organic Crudes and Intermediates and Organic Dyes and Pigments; 5162 Plastic Materials and Basic Forms and Shapes; 1011 Iron Ores
The M. A. Hanna Company is one of the world’s top 20 specialty chemicals companies. In the mid-1980s the company transformed itself from a world-class mining company to an influential specialty chemicals conglomerate. Hanna manufactures, augments, and markets plastic and rubber compounds, color and additive concentrates for the plastics industry, and plastic resins and engineered plastic shapes. Hanna also produces specialty polymer products for the printing, textile, construction, and automotive industries. The company ranks among Fortune magazine’s list of America’s 500 largest companies, with 36 manufacturing facilities and 169 distribution outlets throughout the world. Throughout the 1990s Hanna hoped to “build a focused specialty chemicals company capable of delivering superior growth and a premium stock valuation,” according to a revised mission statement.
Company namesake Marcus Alonzo Hanna was born in 1837 on his parents’ Lisbon, Ohio, farm. His father, Dr. Leonard Hanna, moved to Cleveland in 1852 after competition from railroads undermined the family investment in a canal project. After trying a grocery business, Dr. Hanna joined with his brother Robert and another investor in a copper and iron trading venture in the late 1850s. The partners soon expanded operations to include coal mining.
When young “Mark” was expelled from Western Reserve College for distributing a risque flyer at a student event, he went to work for his father as a warehouse clerk. Mark worked as a deckhand and purser on his father’s Great Lakes ships, then joined the Union Army in the Civil War. Dr. Hanna died in 1862 after a long illness, and his minerals trading firm dissolved. At war’s end, Hanna began a courtship with Charlotte Rhodes that launched the company that would keep his name long after it passed from his family’s hands.
Hanna’s future father-in-law, Daniel P. Rhodes, was a rigid Democrat who initially opposed his daughter’s involvement with Hanna, an active Republican. But when Rhodes’ son left Rhodes & Co. and Hanna made some ill-fated investments, Hanna joined his father-in-law’s pig iron and iron ore business. Hanna aggressively acquired more mines and diversified Rhodes & Co. into lake steamers, docks, warehouses, and shipbuilding. His entry into Rhodes & Co. coincided with a dramatic expansion of the Midwest’s commercial and industrial influence. The company stimulated this growth at its very source: it brought coal from Ohio and Pennsylvania to the shores of Lake Erie to fuel midwestern industries, and shipped iron ore and pig iron to regional steel factories.
Daniel P. Rhodes died in the 1880s, and Hanna inherited the conglomerate that by that time included mining, shipping, street and freight railways, hotels, and a bank. Hanna’s brothers, Howard Melville and Leonard Colton, and a partner, Arnold C. Saunders, renamed the business M. A. Hanna & Company in 1885.
The new company purchased interests in iron ore, coal mines, and blast furnaces. Mark Hanna was soon known for his compelling personality, sharp business sense, and energetic bearing. He became a prominent industrial executive, builder of a shipping line, and owner of Cleveland’s opera house. As his business influence grew, he aspired to political power as well. Hanna purchased the Cleveland Herald newspaper to boost Republican support, and financed the gubernatorial and presidential campaigns of William McKinley. His massive $3.5 million campaign contributions earned him the nickname “Red Boss” (“red” for iron dust and “boss” for his political activities), a U.S. Senate seat, and the rancor of some of the nation’s largest newspapers. Hanna turned the company over to his brothers in 1896 so that he could chair the National Republican Committee full time. He was elected U.S. senator in 1897, and served until his death in 1904.
Howard M. and Leonard C. Hanna continued on with the family business. Howard would become known as the businessman of the family, and his son would lead the company in the early 20th century. Leonard was remembered more for his civic and philanthropic contributions to the city of Cleveland. Marcus Hanna’s corporate legacy would end with son Daniel R., whose involvement precipitated a leadership crisis at Hanna.
Howard Melville Hanna, Jr., Daniel’s cousin, was groomed for leadership of the family company. When, in 1915, he grew disgusted with Daniel’s playboy lifestyle and apparent lack of commitment to the business, Howard bought Daniel out of the Hanna company. Within the next six years, Leonard C., Howard, Sr., and cousin Daniel all died, leaving Howard, Jr., to steer the Hanna ship virtually alone. The abrupt change in leadership had coincided with lagging earnings, tax hikes, a decline in the coal industry, and lessened demand for iron ore.
George M. Humphrey became Hanna Company’s last partner when he invested in the firm in 1922. He had joined the company in 1917 as a legal advisor, and quickly built a promising business and personal relationship with Howard Hanna, Jr. A. C. Saunders continued as a partner until 1922, when the M. A. Hanna Company was incorporated with Matthew Andrews as chairman of the board and Howard M. Hanna, Jr., as president. Humphrey and Hanna used the influx of capital from that first stock offer to encourage growth at the company’s profitable divisions, and sold off Hanna’s losing divisions. Their work to promote efficiency during the 1920s helped carry M. A. Hanna through the Great Depression profitably.
When chairman Matthew Andrews died in 1929, Howard M. Hanna, Jr., was elected chairman and George M. Humphrey was made president. Humphrey was instrumental in the creation of the National Steel Co. that year. In conjunction with the national trend toward vertical integration, National Steel combined the Great Lakes Steel Co., a sheet steel business in Detroit, with Pittsburgh’s Weirton Steel and Hanna’s Lake Superior iron ore properties, ships, and lakefront blast furnaces.
The consolidation enabled National Steel to integrate all aspects of the steel business, from raw materials to finished product, in one company. Ernest Weir, of Weirton, served as chairman of the new company, George Fink of Great Lakes Steel was president, and George Humphrey chaired the executive committee. In exchange for its iron ore operations, Hanna received more than one-fourth of National Steel’s capital stock, making Hanna the conglomerate’s biggest shareholder. Having the most modern plants in the United States on the eve of the Great Depression made National Steel one of the country’s most efficient and profitable steel works.
Although the company’s primary activities were still concentrated in coal, iron ore, blast furnaces, and lake shipping, they were set off into separate companies with Hanna exchanging its assets for common stock of large affiliates like National Steel Corp., Consolidation Coal Co., and eventually, Hanna Mining Co.
The Hanna company had three primary spheres of operation in the 1930s. The oldest was the ore and lake coal group, which incorporated Hanna’s 20 Lake Superior ore mines, a mine in Missouri, and one in New York. National Steel became a “cash cow” for this division of Hanna—it could count on the associated company as a customer in bad times, like the Depression, yet continue to sell to National’s competitors as well. The ore and lake division also included the Franklin Steamship Corp., a subsidiary that provided shipping on commission for other companies. In 1945 Franklin Steamship was consolidated with the rest of Hanna’s iron ore businesses as Hanna Coal & Ore Corp. Later named Hanna Mining Co., Franklin Steamship would evolve into Hanna’s primary business in the 1960s.
Hanna’s Susquehanna Colleries division, the company’s second sphere of operation, handled the company’s anthracite coal assets, which included three Pennsylvania mines with combined capacity of 12,000 tons daily by 1946. And the company’s third division concentrated on investments in a wide variety of industries, including rayon, oil, plastics, copper, tobacco, and banking. The division grew increasingly important in the 1930s and 1940s. Hanna purchased significant interests in: Standard Oil (.3 percent); Seaboard Oil of Delaware (.8 percent); Cleveland’s National City Bank (5.1 percent) in 1933; Industrial Rayon Co. (17.2 percent) in 1935; Union Bank of Commerce (8.4 percent) in 1941; Consolidated Natural Gas (.3 percent) in 1943; Durez Plastics & Chemicals (11.6 percent) in 1945; and Pittsburgh Consolidation Coal (37.8 percent), which was formed in 1945.
In 1946 Hanna transferred its stock holdings in Northwestern-Hanna Fuel Co., which operated six coal docks in upper lake ports, and all of its coal mine operations in Ohio, to the Pittsburgh Consolidation Coal Co. for $2.43 million and 325,000 common shares. Hanna retained management of the shipping and mining interests as part of its lake coal business.
The company’s sizeable investments entitled it to a voice in the management of many of the companies it financed, and, by the end of World War II, Hanna decided “to concentrate our holdings in a few companies in which we have confidence and then help in every way we can to build those companies into the strongest possible position in their respective fields.” M. A. Hanna closed 1946 with $77 million in assets and holdings in some of North America’s most important companies. Its own operations were conducting research to make lower grades of Lake Superior ore available, and exploring manganese deposits in Arizona and minerals deposits in South America.
During the 1950s M. A. Hanna evolved through exchanges of stock and property into an investment company, while the Hanna Mining subsidiary concentrated on production and shipping. In 1951 M. A Hanna acquired Canada’s Empire Hanna Coal Co., Ltd., and made it into a division. Hanna Mining Co. went public in 1958 and purchased 84,300 class B shares in M. A. Hanna. M. A. Hanna, in turn, owned 46 percent of Hanna Mining. The two companies also shared several board members.
The 1950s also saw Hanna Mining Co. in a controversy over government nickel contracts. As the only nickel miner in America, Hanna Mining produced emergency military stockpiles of the metal between 1953 and 1960. The United States Senate accused Hanna Mining of excessive profit-taking during hearings in the early 1960s, charging that the company made $10 million profit after taxes on an investment of $3.6 million.
In 1961, after Gilbert W. Humphrey (son of George M. Humphrey) had advanced to president and CEO of M. A. Hanna, the company announced plans to dispose of direct business activities. By doing so, M. A. Hanna became the United States’ largest closed-end investment company, with assets of about $500 million. As part of the plan, mining, shipping, and dock operations of companies affiliated with M. A. Hanna and the company’s substantial investment in Iron Ore Co. of Canada were sold to Hanna Mining Co. M. A. Hanna’s anthracite coal properties were sold to a new independent group, Empire Hanna Coal was purchased by outside interests, and Hanna’s Great Lakes coal and vessel fueling business was sold to Consolidation Coal Co.
Within just three years, the market value of M. A. Hanna’s three principal holdings—National Steel Corp., Consolidation Coal Co., and Hanna Mining Co.—had grown to $422.9 million. In 1964 Hanna Mining’s directors were so confident in the new organization of their company that they proposed a three-for-one stock split and a dividend increase. But in less than a year, the company’s fortunes changed, and M. A. Hanna proposed that it be liquidated, leaving Hanna Mining as an autonomous corporation. Hanna Mining purchased one million shares of National Steel from M. A. Hanna and became the operating agent for National Steel iron ore mines and ships. M. A. Hanna sold its bituminous coal properties to Consolidation Coal Co. for $5.5 million.
After the liquidation, Hanna Mining became the focus of the management’s worldwide operations. Hanna Mining reported six consecutive years of record high profits. The increases came from flourishing investments in Iron Ore Co. of Canada and National Steel. Overseas mining activities in Australia, Guatemala, and Brazil also contributed to Hanna’s prosperity. Hanna enjoyed steadily increasing earnings in the 1970s, when the company entered into joint mining ventures in Liberia, Colombia, Australia, and Brazil, and established a copper mining project in Arizona. Within just one year at the end of the decade, earnings tripled.
The company reached record sales in 1981 of $400 million with $44 million in net income. But Hanna plummeted from that summit in the 1980s, when foreign competitors initiated their devastating assault on the U.S. steel industry. The situation was exacerbated when, in 1981, Canadian financier Conrad Black of Norcen Energy Resources, Ltd., initiated a year-long takeover battle. Black’s purchase of a large block of Hanna stock in October 1981 quickly captured the attention of Hanna chairman Robert F. Anderson and other members of the board. After a relatively brief, but heated federal hearing, Black and Hanna made a standstill agreement that gave Black 20 percent of Hanna in exchange for $90 million. Black became a director, and the last descendant of an M. A. Hanna & Company partner, George M. Humphrey II, resigned from his position as senior vice president by 1984.
In 1982 Hanna lost $80 million on $300 million in sales, and was forced to shut down all of its operations (except one Brazilian iron ore mine) for three weeks in December of that year. During that break, the company essentially abandoned its long-held position in mining and began a massive restructuring. Between 1982 and 1986 Hanna racked up more than $320 million in losses, and its roster of employees plunged from 8,000 to 3,500. When Martin Walker became CEO and chairman in 1986, he led the switch from mining to plastics. Between 1980 and 1985 Hanna Mining sold 60 percent of its coal and iron businesses and a batch of preferred stock to finance an acquisition binge that concentrated on distribution and compounding in two fields: construction aggregates and polymers. Soon after, Hanna closed its last U.S. iron mine.
Within less than a year, the company spent half a billion dollars to convert itself from a major mining company to an influential polymer compounder, plastics distributor, and colorants producer. In 1986 the company purchased Burton Rubber Processing; colorants processors Allied Color Industries and Avecor; and Day International, a major processor, distributor, and manufacturer of polymer printing blankets. Hanna also purchased PMS Consolidated, the world’s leading plastic colorants processor; Colonial Rubber Works, a big compounder; and Cadillac Plastic, the number one distributor of plastic shapes in 1987. The purchases revived Hanna’s sales from $130 million in 1986 with a $104 million loss, to $460 million in 1987, and a $37 million net. Hanna surpassed $1 billion in worldwide sales before the decade was out.
In 1990 Hanna acquired leading French plastics colorant producer Synthecolor S.A., a company with an estimated $25 million in annual sales. In 1991 Hanna purchased Seattle plastics distributor FibreChem for $70 million, and hiked its formulated colorants capacity with the opening of a new PMS Consolidated plant. The addition of DH Compounding, a joint venture with Dow Chemical, that same year gave Hanna a total of four compounding units. Another Canadian takeover threat was thwarted that year, when Brascan, a Canadian natural resources conglomerate, gobbled up 30 percent of Hanna, which repurchased the stock at a premium to avoid the takeover.
CEO Walker told Chemicalweek in 1991 that Hanna hoped to become “less a subcontractor and more a proprietary company” in the last decade of the 20th century. The decision to refocus came on the heels of an early 1990s recession that highlighted Hanna’s dependence on contract work that distanced the company from the end users of its products and services. The company sold its share of Iron Ore Company of Canada to Mitsubishi Corp. in 1992, and divested the oil interests of Midland Southwest Corp. early in 1993. It planned to jettison its remaining natural resources businesses during the first half of the decade to focus on the polymers industry.
Burton Rubber Processing, Inc.; Colonial Rubber Works, Inc.; DHCompounding Company; MACH-1 Compounding; Southwest Chemical Services; Plastic Distributing Corporation; Allied Color Industries, Inc.; Avecor, Inc.; PMS Consolidated; Wilson Color; Synthecolor S.A. (France); Wilson Color (Belgium); Bruck Plastics Co.; FibreChem, Inc.; Plastic Distribution Corporation; Cadillac Plastic Group; Day International Printing Products; Day International Textile Products; Hanna Insurance Services; BenePlan Strategies.
Gerdel, Thomas W., “Raima’s Last Iron Mine in U.S. to Shut,” Cleveland Plain Dealer, May 14, 1985, p. IE.
Gleisser, Marcus, “‘60s Caught Hanna in Debate about U.S. Nickel Contracts,” Cleveland Plain Dealer, October 8, 1984, p. 14E.
Gleisser, “Hanna Family in High and Low Society,” Cleveland Plain Dealer, October 9, 1984, p. 14E.
Gleisser, “Hanna Has Come Long Way, Marcus,” Cleveland Plain Dealer, October 8, 1984, p. 14E.
Gleisser, “Hanna Mining Seeks Revival of Old Name,” Cleveland Plain Dealer, March 21, 1985, pp. 1C, 2C.
Gleisser, “Last Humphrey Leaves Hanna,” Cleveland Plain Dealer, September 22, 1984, p. 3B.
Gleisser, “Takeover Attempt Tangled Affair,” Cleveland Plain Dealer, October 10, 1984, p. 5B.
McConville, Daniel J., “M. A. Hanna Prepares for Better Days,” Chemical Week, June 19, 1991, pp. 25–26.
McGough, Robert, “High Iron,” Financial World, April 11, 1992, pp. 26–27.
Rose, William Ganson, Cleveland: The Making of a City, Kent, Ohio: Kent State University Press, 1990.
—April S. Dougal