The Pattison Crash
last updated June 8th 2014
THE FLOATATION
"What Happend When?
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In July 1895 James Young, of the firm of Messrs Boyd, Jameson, & Kelly, W.S., Leith was contacted by Robert and Walter Pattison about the possibility of a conversation of the firm Pattison, Elder & Co to a company. Mr Young prepared a memorandum and a handbook. He was again contacted by the brothers in December same year and they asked that he contacted an accounting company - Messrs Carter, Greig & Co to examine the books with a view to floatation. One of the brothers prepared a proof copy of the prospectus with blanks left for insertion of a certicficate by the accounting company.
In the beginning of 1896 James Greig and 6 clerks "worked day and night for a month" to examine the books. Robert Pattison wanted to have an examination of the last two years and eight months but Mr Greig thought it was too short and examined the books over six years. In March 1895 he handed some notes to the brothers which the signed "in order that every line and word of them was accurate"
In March 1896 came the prospectus which was advertised in newspaper in Scotland and England.
"PATTISONS LIMITED. Incorporated under the Companies Acts, 1862 to 1890.
Capital £400,000,
divided into
- 20,000 Ordinary Shares of £10 each (£200,000)
- 20,000 5 per Cent Cumulative Preference Shares of £10 (£200,000)
The Messrs. Pattison, the vendors, will take the whole ot the Ordinary Shares, amounting £200,000, and One-Fourth of the Preference Shares, in all £250,000, in part payment of the purchase price. The remaining 15,000 Five per Cent Cumulative Preference Shares are now to be offered for public subscription, payable £1 per share on application, £2 on allotment, £3 on 15th April, and £4 on 15th May; but payment may be paid in full on allotment if preferred. The Preference Shares are entitled to a Cumulative Preferential Dividend of 5 per cent per annum, and will also be entitled to rank for return of capital in priority to the Ordinary Shares. Dividends (payable half-yearly 30th June and 31st December), on the Preference Shares will accrue from the dates of payments. When no allotment is made the amount paid on application will be returned in full, and when the number of shares allotted is less than the number applied for the surplus will be applied towards the payments due on allotments.
The statement frpm the chartered accounting firm was also included:
Messrs. Carter, Greig, and Co., chartered aocountants, Edinburgh, who have examined the books, report that after eliminating interests on loans and on partners' capital, and allowing for discounts and bad and doubtful debts, the average net annual profits for the six years ending 31st December, 1895, amounted to £22,889 10s. 5d., and that the net profit for the two years and eight months ended 31st December, 1895, averaged £31,611 12s. per annum. The books of the firm have been usually balanced at 30th April each year, but to facilitate transfer the company the balance has been made at December, 1895
The company had following assets as per the prospectus: (only the total value was stated in the the prospectus)
1. PROPERTIES, MACHINERY, FURNITURE ETC
- Constitution Street Leith (164, 166, 168, 170 and 172) (as per valuation £9,600)
- Duddingston Brewery (as per valuation £23,396 13 s 4d)
- Excise bonded and other warehouse, offices Yardheads Leith (as per valuation £5,531 5s)
- Offices, warehouses, workshops, Constitution Street Leith (121 -127), Links Lane and John´s Place (as per valuation £17,662 + £6,531 10s)
- Leasehold bonded and other warehouses, officed Leith Docks (13)
Above valued by Mr. W. Hamilton Beattie, architect and valuator, Edinburgh, including utensils fittings etc £68,355 19s The valuation is a handwritten 17 pages long document dated 3rd of March 1886.
2. STOCK-IN-TRADE
- "consisting largely of malt and grain whiskies of the choices makes, valued by Messrs. Leechman and Gray, brokers. Leith and Glasgow ; and
the wines, brandies, &c., valued at the lowest market value. The Company will take over along with these, the outstanding debts due to the
firm and the liabilities. The vendors guarantee the stock-in-trade, and the debts due to the firm (which they guarantee) to exceed the
liabilities by £100,000."
3. OTHERS
- Shares in Leith Warehouse Co Ltd, cash, goodwill
"The Preference Shares are entitled to a Cumulative Preferential Dividend of £5 per cent per annum, and will also be entitled to rank for return of capital in priority to the Ordinary Shares. Dividends (payable half-yearly 30th June and 31st December), on the Preference Shares will accrue from the dates of payments"
The Directors were:
- Robert Pattison
- Walter Pattison
- James Swan, cattle salesman (Father in law to Walter Pattison)
- Ronald Stran, brewer (he died already in the first year of the company)
The banks were:
- BRITISH LINEN COMPANY BANK
- CLYDESDALE BANK
It was a great interest for the preference stock and was subscribed ten times over. In less than three months 1898 66 joint-stock companies were registered in Scotland.
This type of floating - where the existing owners kept all the ordinary shares and gave out preference shares was a common procedure to borrow money. The dividends for these shares were paid first (normally 5 or 10 percent per annum) and then the ordinary shareholders were paid.
The statutory meeting was held in July 1896 and Robert Pattison said that the business of the company was going satisfactorily, the sales since the beginning of the year having very largely exceeded those of the corresponding period in any former year in the history of the business. He further reported the brewery had already established itself distinct success, and that beer from the outset had been of excellent quality, and both as regards quality and the extent of the sales had fully satisfied the expectations of the directors"
It is not much reported in the papers after the floatation in March 1896 until the crash in December 1896, but the share was £10 12s at the end of March.
However already end of 1896 Clydesdale bank had to arrange a meeting with the brothers because of financial problems. This was not public and the result was that the bank got securites and shares from the brothers.
Sources:
Manchester Courier and Lancashire General Advertiser - Wednesday 11 March 1896
Glasgow Herald - Wednesday 11 March 1896
Edinburgh Evening News - Friday 13 March 1896
Edinburgh Evening News - Saturday 04 July 1896
Edinburgh Evening News - Friday 12 July 1901
Yorkshire Evening Post - Wednesday 10 July 1901
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