Alleghany Began as Railroad Company

John Wolz

Alleghany Corporation traces its roots back to the Van Sweringen brothers, Otis Paxton and Mantis James, who formed the company a few months before the stock market crash of 1929.
�The �Vans� were a product of the heady years of the Roaring Twenties,� according to a history of Alleghany published in its 1992 annual report. �They had lived through a period of wild speculation in the stock market sparked by the rosy boom-time vision that all you had to do to become rich was mortgage your home, hock everything else of value and put your money in a market that could go nowhere but up.�
Starting in 1916 by buying the Nickel Plate Railroad, the Vans built a $3 billion railroad network with 23,000 miles of track � one-fifth of the nation�s total.
By 1929 they had acquired Chesapeake & Ohio, the Erie and the Pere Marquette, and Alleghany was formed as the holding company.
Their reliance on debt nearly destroyed the company in the Great Depression. The brothers defaulted on a loan in 1935 and both died within a year.
They had gone from being worth $100 million to leaving a $500,000 insurance policy and their suburban Cleveland home.
Midamerica Corporation had picked up the company in an auction and sold it to a syndicate headed by Robert Young, Allan Kirby and Frank Kolbe.
The new owners battled for years in and out of court for control and to protect the corporation from its Missouri Pacific holding bankruptcy.
MoPac issues weren�t resolved until 1973, when Alleghany won $42.4 million plus stock in a lawsuit against controlling stockholder Mississippi River Corporation.
Alleghany was immersed in court and regulatory battles over New York Central, B&O, C&O and the Pennsylvania Railroad, including a six-year process of winning ICC approval for the PennCentral merger in 1968.
Alleghany began diversifying in 1949 by acquiring stock in Investors Diversified Services, a Minneapolis-based financial services company.
The IDS Tower that changed the Minneapolis skyline was built under Alleghany�s ownership.
Fred Kirby II succeeded his father as CEO in 1967, and the current chairman, John Burns Jr., joined Alleghany as vice president in 1968.
Kirby emphasized decentralization of management, allowing Alleghany businesses quasi-autonomous operation. The parent company set goals, provided incentives and monitored performance.
Alleghany moved into the steel business with the purchase of MSL Industries in 1974, changing the corporation from an investment company to an operating company.
In 1983 IDS was sold to American Express for more than $780 million, and Alleghany went shopping with the proceeds.
Acquisitions in the late �80s included Chicago Title & Trust, Safeco Title, Ticor Title, Sacramento Savings Bank and in 1991 world mineral producer Celite Corporation.
In 1987 the MSL Industries businesses, with the exception the fastener importer/distributor Heads & Threads, were spun off to stockholders as Cyclops Industries Inc.
Burns succeeded Kirby as president and CEO in 1992.
Today Alleghany is an operating company with no railroad investments.