Kreuger & Toll

Kreuger & Toll was a company founded May 18, 1908 by the two Swedish engineers, Ivar Kreuger and Paul Toll with Henrik Kreüger working as a consultant and chief engineer.

History

Early 1908, Ivar and his cousin Henrik Kreüger had planned to found a construction company that would work for the US company Trussed Concrete Steel Co. on the Swedish market. At the same time Henrik Kreüger had introduced Paul Toll for Ivar. It turned out that Ivar formed the company with Paul that had several years of practical experience in the construction business as an engineer and site manager for the Swedish construction company Kasper & Höglund AB [Kasper & Höglund AB was later, in 1914 bought by Paul Toll.] .

The company was founded as a construction company with the name Kreuger & Toll May 18, 1908 by Ivar Kreuger and Paul Toll with a total start capital of 10,000 SEK. [10 000 SEK, recalculated for value in 2007; 450 000 SEK.] The company was set up with a 60/40% ownership (Ivar 60%) and a profit split 50/50 between Ivar and Paul. The original capital was raised by the banker Oscar Rydbeck that became Ivar's main bank contact and economic adviser all along until the Kreuger crash in April 1932. On August 10, 1911 the company changed to AB [AB is the short term for "Aktiebolag", a company with share holders, corresponding to a corporation in USA.] with the registered name Kreuger & Toll AB.

In 1917 Kreuger & Toll AB was divided in two parts; (1) Kreuger & Toll Construction AB, run by Paul Toll and (2) the holding company Kreuger & Toll AB run by Ivar Kreuger. At the same time Swedish Match was founded. In parallel Kreuger started to invest in a number of industrial companies, mainly in the Swedish industry. In 1923 Kreuger founded the holding company IMCO (International Match Corporation) together with Lee, Higginson & Co. in New York. IMCO handled the Kreuger match business in America, South America and other countries outside Europe.

During the year 1930, 64% of the entire trade on the Stockholm stock exchange was related to Kreuger companies [Stig Algott, "Stockholms fondbörs 100 år" (eng. "Stockholm stock exchange 100 year"), 1963. (Swedish)] .

In April 1932, a month after Ivar Kreuger's death, most of the Kreuger empire went bankrupt. Kreuger & Toll Construction AB however survived, as this company did not belong to the holding company. The company changed its name to just Toll Construction AB. The company merged with another construction company in 1968. Swedish Match was reconstructed in 1936 with the help of government loans that was repaid within a couple of years, but IMCO did not survive. The work with the bankruptcy took nine years, and was completed in 1941. One of the reasons for the long investigation time was that the documentation was insufficient, transactions were difficult to follow and complex cross-ownerships between the companies that was almost impossible to straighten out. Only Kreuger had the full view of how the company was built up.

A summary of the economics for the holding company Kreuger & Toll AB, including IMCO, excluding the construction business within Kreuger & Toll Construction AB, was carried out in 1943 [Bonnier encyclopedia, 2:nd edition 1943, page 384–385, "Kreuger crash" (Swedish).] , showing the following figures [The entire world population in 1925 was around 2.6 billion people (Ref: Bonnier encyklopedia SE, 1943) and the size of the industrial world and market in correspondence with that. The direct comparison of business recalculated for values in 2007, with a population around 6.5 billion people is thus difficult to make.] ;
*Actual profits generated from 1917–1932: 151 million SEK (in year 2007 equal to 4000 million SEK)
*Actual return value to owners of shares and debentures, 1917–1932: 668 million SEK (in year 2007 equal to 18,500 million SEK)

To cover this huge gap, analysts have claimed that Ivar Kreuger's intention was probably to slowly increase the match prices as soon as he had gained control of the entire match production in the world, parallel with the increased profits from his industrial companies that soon became a large part of the holding company's business, and continuously increasing during 1930, while the match industry had a tendency to slowly decrease in importance.

Swedish Match and Kreuger & Toll AB holding company headquarters was the Tändstickspalatset (eng. The match palace) with the address Västra Trädgårdsgatan 15 in Stockholm where Ivar Kreuger had his Swedish office. The house was built by Kreuger & Toll Construction AB. The main office for the Swedish Match remained in the same building until 1993.

Image gallery; Persons behind the foundation of Kreuger & Toll in 1908

Footnotes

ee also

*Kreuger crash