On this day in economic and financial history…
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The first paper industry in the world was born in the imperial Han court of China on March 11, 105. More than 1,900 years ago today, court eunuch Ts’ai Lun first presented his invention to the Han emperor. The emperor, impressed by the useful new writing surface, rewarded his servant by promoting him to a position of substantial wealth.
Ts’ai’s basic innovations are still used in papermaking today, showing the durability and universality of his method. The first standardized Chinese paper, refined from an earlier process, was made by pulping bamboo fiber and various tree barks in water and then stretching the drained goop over a frame covered in porous cloth. The basic method of pulping plant matter and stretching it thinly remains in use today, although it’s been highly automated and modernized over many centuries. Even today, China remains the leading country in terms of paper production — yet International Paper Company (NYSE:IP) of the United States (NYSE:X) leads corporate sales charts with nearly 12 million tons of paper produced in 2010. In Ts’ai Lun’s day, it’s doubtful that all the people in China could have made that much paper in a single year.
Steel and oil, together at last
U.S. Steel expanded beyond its core steelmaking operations for the first time on March 11, 1982, when it finalized a merger with Marathon Oil Corporation (NYSE:MRO) . The merger, which resulted from a heated battle with Mobil Oil for control of the Ohio-based mid-tier oil company, was — at a cost of $6.2 billion — the second-largest takeover in American corporate history at that time. Marathon Oil Corporation (NYSE:MRO) executives had pushed back against Mobil’s efforts for fear of antitrust problems, while many employees feared mass layoffs once the larger oil company had gained access to Marathon Oil Corporation (NYSE:MRO)’s deep oil reserves. Marathon Oil Corporation (NYSE:MRO) and U.S. Steel executives waged a fierce battle against Marathon Oil Corporation (NYSE:MRO)’s own shareholders in the days leading up to the merger’s acceptance, as a group of dissidents said the company’s true value was closer to $18 billion. However, U.S. Steel’s white-knight offer was the only one to clear regulatory hurdles and provide a value that major institutional shareholders would accept.
The merger continued a trend of Dow Jones Industrial Average (Dow Jones Indices:.DJI) components merging with oil companies, which began the year prior with E I Du Pont De Nemours And Co (NYSE:DD)‘s record-breaking $7.8 billion acquisition of Conoco. Two years later, (Chevron Corporation) (NYSE:CVX) took shape from the merger of Standard Oil of California and Gulf Oil, at a price nearly double that of the record DuPont-Conoco tie-up of 1981.
However, both of the earlier mergers were eventually undone. DuPont divested itself of Conoco in 1998, spinning the business off in what was then the largest IPO in history. U.S. Steel, which became USX in 1986 and left the Dow in 1991, split into steel and nonsteel operations in 2001. The energy-focused half of USX became Marathon Oil again in 2002. Three decades after the merger, the fortunes of U.S. Steel and Marathon had diverged considerably. The former, once the world’s dominant steelmaker, was worth less than $4 billion. Marathon, at a $23.5 billion market cap, was approximately six times U.S. Steel’s size.