Business & Finance: Swallowed Up

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While the Federal Trade Commission was serving up the facts on big business (see above), a Cleveland businessman last week provided a pamphlet case history on why his Allied Oil Co. was swallowed up by a bigger company.

Wellesley Wellington Vandeveer, onetime member of the Petroleum Administration for War and present delegate to the U.N.'s Economic and Social Council, was a cofounder of Allied Oil Co. 24 years ago. He and Partner Floyd Roy Newman started with $30,000 capital, most of which was borrowed. They fought off slashing competition, plowed back their profits and finally built the company into a $50 million-a-year business. Last year they sold out to Ashland Oil & Refining Co. for $12 million worth of the larger company's stock.

Vandeveer gave two main reasons for selling: 1) tax laws which "encourage small businessmen to take their earnings in capital gains instead of paying taxes on current income" ("you have to sell out"); 2) the problem of paying inheritance taxes. As the two partners owned almost all the corporation's stock, the shares had no established market value. A public sale, said Vandeveer, would have brought a price far below the company's worth as a going concern. Yet it was precisely Allied's value as a going concern which the Government would have used as a basis for inheritance taxes. Since these taxes "would have greatly exceeded the estate value . . . held outside of Allied by either owner ... each knew that the untimely death of the other could wipe out the earning power of the company and bankrupt the surviving owner."

At 62, Vandeveer is now a crusader for new tax laws that will encourage small business to stay in business. Says he: "I suggest that it will be worthwhile to turn the Government's inquiring eye on itself —and determine how the government's . . . bodies contribute to the delinquency of small business." But reforms, if any, will not do him any good, he says; "neither . . . investigations, decrees nor edicts . . . can bring me back to life as a competitive factor in the oil marketing business."