The Coke Machine - Michael Blanding [13]
By 1916, he was ready to give up his company, but not his legacy, shocking his board by slighting his natural successor, Dobbs, and making Howard president instead. A year later, he gave away nearly all his stock to his wife and children as a Christmas present. As Asa Candler left Coke, he turned wholeheartedly to public service, running for mayor of Atlanta and winning a two-year term from 1917 to 1919. If voters hoped he would use his personal fortune to relieve the city’s debts, though, they were disappointed. Instead, his administration proposed raising water rates, which would fall disproportionately on the poor, and urged rich citizens to voluntarily overvalue their property to pay more taxes (few did).
In fact, Candler was deeply ambivalent about the power of altruism—happy to give his money away for the greater good when he was in control of who received it, but resentful of sharing the spoils of capitalism with those he felt hadn’t built the system. Meanwhile, the company foundered in his absence. Howard was a lackluster president, struggling to keep Coca-Cola afloat during the sugar rationing of World War I. Meanwhile, in 1919, in the wake of Candler’s slight, Dobbs became head of the Atlanta Chamber of Commerce, where he got to meet many members of the city’s business elite. Just as Robinson had persuaded Candler to buy up the company decades earlier, Dobbs would persuade one of them, Trust Company president Ernest Woodruff, to take over the company now.
As a business tycoon, Ernest Woodruff was almost a caricature—a cross between Gordon Gekko and the Monopoly Man. His occupation was to make money, mostly through the takeover, restructuring, and sale of real estate and transportation companies. He had a reputation for playing dirty, not above breaking into a rival’s office late at night to steal files. And he was even more of a skinflint than Candler, once supposedly strapping $2 million in bonds to himself and his secretary on a train from Cleveland in order to save $200 in shipping costs. This was the man to whom Dobbs turned to buy the Coca-Cola Company, enlisting the company’s lawyer Harold Hirsch as go-between. By the summer of 1919, he had secured signatures from all five of Candler’s children to sell the company for $15 million in cash and $10 million in stock, the largest financial transaction ever conducted in the South at that time. Not one of the children said a word of the sale to their father.
The buyer was a syndicate of three banks—Woodruff’s Trust Company of Georgia, and two New York Banks, Chase National and Guaranty Trust. Woodruff engineered a deal that, while technically legal, relied on insider information to offer a killing to the businessman and his colleagues. Settling on 500,000 shares, they sold the first 417,000 to brokers at $35 a share—anticipating they’d turn them around to the public at $40 or more. Secretly, however, they kept back 83,000 shares for insiders to buy at the bargain price of $5 each, assuring control of the company and millions of dollars in profit for pennies on the dollar. The gambit worked, and the new Coca-Cola Company was incorporated in Delaware, a state known for its low business taxes and leniency on corporate bylaws.
One of Woodruff’s first actions was to reward Dobbs with the presidency of the new company, even while he maintained control with a three-man Voting Trust. Surveying his new domain, Ernest Woodruff liked what he saw—one of the fastest growing companies in the world, with seemingly unlimited territory to expand.
Quickly, however, he identified an enemy within the ranks: the bottlers to whom Candler had given away franchise rights for a song. The bottling system had grown from nearly 250 bottling plants