MERGERS: The Wayward Cow-Bus

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Mythology is full of strange animals like the hippogriff, a beast that is half horse and half griffin.* Last week came word of a proposed merger which would create a real-life business hybrid—part cow and part bus. The companies concerned, whose directors have already approved a stock swap, are ACF-Brill Motors Co., maker of buses and trackless trolleys, and Foremost Dairies, Inc., seller of milk, ice cream and other dairy products in the South and (through foreign subsidiaries) the Far East. For ACF-Brill, which just turned the profit corner last year, after three years of losses (TIME, April 7), the deal, if the stockholders approve, means accepting a subordinate position. President Charles W. Perelle will stay on as head of the new company's bus division. But boss of the whole shebang will be Paul E. Reinhold, 58, the man who made Foremost foremost among the South's independent dairies.

Son of a Pittsburgh baker, Reinhold got into the ice-cream business as a boy, chopped ice from a nearby river to freeze his product, and delivered it by wheelbarrow to local drugstores. He built a sizable Pittsburgh business, moved to Florida, and, in 1931, took over the management of Foremost. By expanding into new markets, he boosted sales 50-fold (to $53 million in 1951), has more than doubled Foremost's net (to $1,508,493) in the past five years alone.

Past acquisitions by Reinhold have all made sense. But why did he want a bus company? One reason, said he, is that ACF-Brill may be valuable in "developing equipment for the transportation and refrigeration of dairy products." Another is that when current defense contracts are worked off, ACF-Brill will have upwards of $10 million in working capital, which Foremost can use for further expansion. But Wall Streeters suspected that a very important reason for the merger was similar to that which had encouraged Floyd Odium to consider buying money-losing Kaiser-Frazer Corp.: the advantage of taking over a company's past losses to offset the buying company's excess profits taxes (see Taxes). ACF-Brill, with $25 million in invested-capital tax base and some fat losses (a three-year total of $5,569,583) to its credit, would be a fine tax hedge for Foremost, a growth company now beginning to feel the effects of the excess profits tax.