(3 of 4)
airframe makers to pool their skills, the result might
give the airlines a plane whose performance and economy would make it
worthwhile for the airlines to wait.
The U.S. would still have to get its price right. According to current
industry estimates, an American SST Mach 2 would cost about $12 million
to $15 million apiece, while a Mach 3 would cost $20 million. The
British and French are planning to sell the Concorde for less than $10
million. One difference is that the two European governments donated
$500 million outright to develop the Concorde, while the U.S.
government expects to be paid back for much of what it advances. has
lost money for the past two years. In a typically complex deal, the
trio used an incredibly low-priced ticket to ride far on Lionel's
tracks. They got the voting rights to Cohn's 55,000 Lionel shares in
return for an interest-free loan to him of $281,275; Cohn is pledged to
sell them the shares in 1964 and 1965, by which time he hopes that the
stock—which sank from 14⅛ to 5⅛ in four years under his
management—will be selling at a higher price. To top all this, the
restless three last week were negotiating with Promoter Meshulam Riklis
to take over his sprawling (assets: $66 million) but sorely troubled
Rapid-American empire, which controls 1.500 Lerner, H. L. Green,
National Shirt, McLellan and other stores; it also makes printing
plates and plastic signs and sells citrus fruits.
Chucking & Muscling. Muscat, Krock and Huffines got together in 1957
through a mutual interest in rehabilitating a sick New Jersey company
called Reinsurance Investment Corp. With the help of their own private
fortunes, they then began to build their industrial pyramid, swapping
the cash or shares of one company to win control over others or using
shares as collateral for loans to buy other companies. As they got
control of each company, they quickly closed down or sold off
profitless operations, expanded the money-making ones, chucked out many
incumbent executives and consolidated management at the top of the
pyramid.
Though the three work as a team, they have no central office, seldom
meet together, and plot their strategy mostly over the telephone.
Muscat is the leader and operating chief who muscles onto reluctant
boards and does the firing. Krock, who works out of his Worcester, Mass.,
office, is the chief strategist and financial planner. Huffines
handles the lawyers, soothes the stockholders and sews up the corporate
details that the more flamboyant Muscat and Krock would rather not
bother with.
Suits & Skeptics. The three Muscateers boast that they have turned
Defiance Industries' 1961 loss of $384,500 into a 1962 profit of
$497,000. But critics say that much of the gain was due to changes in
bookkeeping, plus the surprising inclusion of profits from one
subsidiary that Defiance had not even taken over until two weeks after
Defiance's fiscal year had ended. A pair of Defiance stockholders is
suing the management because they object to a deal in which the trio
last year paid almost three times its book value to get control of one
company.
Wall Street is also skeptical of such tactics, and the stock of Defiance
has dropped from a 1962 high of 13⅞ to 6⅝last week; B.S.F. is down to
6¾ from last year's peak of 15¼. But the trio carefully maintains a
collectively optimistic face and predicts a profit for
