First Mississippi Corporation Business Information, Profile, and History
Jackson, Mississippi 39215-1249
History of First Mississippi Corporation
First Mississippi Corporation is the largest company chartered in Mississippi and the only company from that state to be listed on the New York Stock Exchange. Operating in one of the more economically underdeveloped regions of the United States, First Mississippi is a crucial local enterprise. In addition to providing employment and tax revenue, it is one of the country's most important niche market chemical manufacturers, producing a line of primary products for the agricultural industry.
First Mississippi originated through a small agricultural cooperative venture that was created specifically for the benefit of cotton farmers in the Mississippi River Delta. In the years following World War II, the nation's return to a peacetime economy left several industries in disarray. Chemical commodities, particularly nitrogen fertilizer, were in short supply. Without this important factor of production, Mississippi farmers stood to lose as much as 30 percent of their annual yields.
The farmers organized and, working through the Mississippi Farm Bureau, proposed the establishment of a new fertilizer manufacturing cooperative located in Mississippi. Eager to gauge the feasibility of such a project, the Bureau's director, Owen Cooper, traversed the state to test the idea with farmers. The concept was enthusiastically supported because, as owners of their own plant, farmers would enjoy greater control over production. And because the plant would be located in Mississippi, it would stem the loss of agricultural dollars to businesses in other states. In addition, the state government was ready to support any venture that would develop industry in Mississippi while improving agricultural yields.
On December 13, 1947, the Farm Bureau organized a stock sale to Mississippi's farmers. The proceeds would be used to build and operate an anhydrous ammonia fertilizer plant located at Yazoo City, about 40 miles north of Jackson, in east-central Mississippi. Eighteen months later, the farmer's cooperative, called the Mississippi Chemical Corporation, had amassed $3 million in capital. The facility was built shortly afterward and put into production. Demand for the cooperative's fertilizer was so great that it had to be expanded to double its original capacity.
By operating within the market, Mississippi Chemical "exported" excess fertilizer to patrons in other states. Because profits from the operation were distributed to the owners as a rebate--called a patronage refund--the farmers collected a direct benefit from their investment. As Mississippi Chemical grew in both scale and profitability, the cooperative spawned proposals for further expansion. The primary motivation was the cyclical nature of the fertilizer industry; many had grown to expect a large patronage refund, but in bad times were left disappointed.
Transformed into savvy businessmen, the farmers developed a plan to diversify Mississippi Chemical's operations into non-related industries to dampen the effects of the occasional down market. This idea quickly gained the backing of the Mississippi business community and the governor's office. On March 19, 1957, Governor J. P. Coleman approved the charter of a new enterprise built around Mississippi Chemical and backed by 21 businessmen, including Fred Anderson, who served as the company's president. As this was the first industrial experiment of its kind, the new company was given the name First Mississippi Corporation. Again, Owen Cooper was placed in charge of raising capital for the new parent company. Hoping to maintain the company's independence from New York financiers and bankers, he developed a plan to transfer the farmers' equity from Mississippi Chemical to First Mississippi. The owners were mailed penny postcards and asked to choose between a patronage refund check or an equivalent value in First Mississippi shares.
Under its charter, First Mississippi was established to develop the state's industries. First Mississippi's directors, whose aims were philanthropic, served without compensation during the first years of the company's existence. Many farmers and an increasing number of non-farming investors supported the idea. Over a period of years, First Mississippi gradually built up enough capital to acquire a variety of companies within the state. Much of this growth was poorly managed, however. Among the businesses taken on by First Mississippi--all of which were failing--were a swimming pool contractor, an egg carton manufacturer, a pipe maker, an animal food company, a metal extruder, and real estate and insurance agencies.
As losses mounted, First Mississippi's board selected a new project development manager named Jack Babbitt. Babbitt's mission was to regain control over First Mississippi's sprawling empire by identifying nonstrategic or noncore operations and selling them. In 1964, just as Babbitt's efforts began to show results, Fred Anderson died suddenly, leaving the company without a president. Babbitt and Cooper, who helped to establish First Mississippi, persuaded another of the company's founders, LeRoy Percy to succeed Anderson.
Having sold off its problem operations, Babbitt and Cooper decided to refocus the company on what it did best--chemical manufacturing. With demand rising, First Mississippi began construction on a duplicate plant at Yazoo City. Separately, the two proposed a joint venture with CF Industries, a farmers' cooperative based in Chicago. Under the terms of the agreement, First Mississippi and CF Industries would build a second anhydrous ammonia plant, with a daily capacity of 1000 tons, and sell the production to CF members through its network. The joint subsidiary was called First Nitrogen, Inc. First Mississippi and CF had difficulty finding a suitable location for First Nitrogen. The joint subsidiary had to be located on the Mississippi River to facilitate transportation of the product north to CF. However, there were no suppliers of natural gas--a primary ingredient in manufacturing fertilizers--existed in the available locations.
In 1965 Babbitt gained the attention of Texaco, which at the time was interested in extending a pipeline up the western bank of the Mississippi River, in Louisiana. First Mississippi offered to locate the First Nitrogen plant at Donaldsonville, Louisiana, giving Texaco a reason to build the extension, and then offered to purchase gas from Texaco on a 20-year contract. First Nitrogen's Donaldsonville plant began operation a little more than a year later, in October of 1966. It proved to be so profitable that after only nine months in operation, CF exercised its option to buy out First Mississippi's 50-percent share of the subsidiary for $4.4 million (nearly double what First Mississippi had originally invested). First Mississippi immediately returned to Donaldsonville because of its access to gas. Working with its Mississippi Chemical and Coastal Chemical subsidiaries, the company set up a third subsidiary called Triad Chemical.
Triad was created to operate an ammonia plant capable of producing 1000 tons per day and a second facility to manufacture 1200 tons of urea--powdery nitrogen fertilizer--daily. The urea plant, one of the largest of its type in the world, was fashioned after a design from a Dutch company. In its first year of operation, the ammonia plant turned out 368,000 tons, then a world record. This helped First Mississippi recover from a dismal year in 1969, when it lost $1.1 million, to a $500,000 profit in 1970.
A year later, however, a routine inspection of the facilities revealed a serious problem with corrosion that could have rendered the facility inoperable and worthless, but a design fix was developed by the company's engineers. Able to count once again upon the long-term health of Triad's output, Babbitt began searching for new customers for the company's urea. He later sealed an agreement with the Ashland Oil Company to jointly build and operate a melamine plant using Triad urea. Melamine is a plastic used in making resins, adhesives, surface coatings and molded products. The new company, Melamine Chemicals, Inc., was jointly owned by First Mississippi and Ashland Oil, but was hindered by delays caused by design modifications. Fortunately for First Mississippi, its other operations were doing well enough to support the costs of these modifications and maintain profitability.
While Melamine was under construction, First Mississippi announced plans to build another chemical facility within the state. The company created a subsidiary named the First Chemical Corporation to run a $7 million complex at Pascagoula for manufacturing aniline and related nitrated aromatic chemicals. The target markets for this production were automotive, pharmaceutical, plastics and photographic companies. The First Chemical plant was developed specifically to reduce First Mississippi's exposure to the volatile fertilizer markets. The basic design was licensed from the Swiss company Lonza, but was substantially improved upon by First Mississippi chemical engineers. The modifications raised utilization of the catalyst from ten percent to about 50 percent and later won First Mississippi a share of future licensing revenues on subsequent designs sold by Lonza.
The construction of these two new plants deeply concerned board members, who feared that the company had overextended itself. Jack Babbitt held discussions with the Williams Companies, based in Tulsa, Oklahoma, about the possibility of being acquired. Williams wanted to enter the fertilizer business to complement its other operations. However, the board considered the dangers in setting up Triad and First Chemical to be only temporary; once in operation, they were likely to run profitably. In addition, the members opposed selling Mississippi's largest indigenous industrial enterprise to a company in Oklahoma.
While Williams failed to get control of First Mississippi, it successfully persuaded Jack Babbitt to switch companies. Babbitt, one of the primary architects of First Mississippi's growth, left in September of 1971. Before he left, he designated a successor, Kelley Williams. Williams, not related to Babbitt's new employer, joined First Mississippi in 1967 as a chemical engineer and manager of corporate planning and development. Only 37 years old in 1971, Williams had demonstrated strong leadership capabilities during his brief tenure. LeRoy Percy and Owen Cooper were reluctant to make Williams' appointment permanent, however, and began a search for a new chief executive.
After eight months, Percy and Cooper were sufficiently impressed with Williams and made his appointment permanent. Williams established a detailed expansion strategy for First Mississippi during this period. As part of that plan, the company acquired a large fertilizer manufacturing facility at Fort Madison, Iowa from the Atlantic Richfield Company on August 31, 1973. In what Forbes described as "Jonah swallowing a big whale," First Mississippi, with only $31 million in assets, took over Arco's $75 million manufacturing complex and the $25 million retail office that came with it.
To carry out the Arco deal, First Mississippi asked the Chase Manhattan Bank, which helped finance the Triad plants, to provide a $31 million loan and float an additional $46 million in industrial revenue bonds. While the acquisition was a huge gamble for First Mississippi, Williams believed that the company could manage Fort Madison better than Arco had and that the fertilizer market was poised for significant demand growth. A month after the deal was completed, federal price controls on fertilizers were lifted, and market prices began to climb. Production was increased to meet the rising demand, and the resulting operating profit and sale of 58 of 121 retail outlets was used to help repay the loan.
The Fort Madison plant, renamed FirstMiss, Inc., quadrupled First Mississippi's volume and helped the company to turn in a $20 million profit in 1974. The following year this figure climbed to $41 million. The successful Fort Madison acquisition won First Mississippi recognition from Wall Street. In January of 1975, First Mississippi became the first Mississippi-chartered company to be listed on the New York Stock Exchange.
Able to resume its diversification campaign, First Mississippi began studying possible acquisitions of businesses involved in oil, gas, and mineral exploration. In 1974 the company established its own natural gas exploration business. Meanwhile, First Mississippi and six oil companies began to look at expansion at Donaldsonville. The consortium decided to build another 1,150 ton per day fertilizer complex adjacent to the Triad facility. The venture, called AMPRO, allowed First Mississippi to market the plant's products, while the six oil companies would provide natural gas for the facility from offshore gas fields in Louisiana.
When the plant was completed in the fall of 1977, however, the Federal Energy Regulatory Commission, a government agency created after the 1973-74 energy crisis, refused to allow the oil companies to exploit the Louisiana gas reserves. Borrowing profits from the booming fertilizer business, First Mississippi stepped up its natural gas exploration efforts. By 1976 the company had 96,000 gas-producing under lease. While this was not enough to supply the AMPRO facility, First Mississippi and its partners managed to secure contracts that allowed the plant to open in 1980.
During this time, AMPRO took the Federal Energy Regulatory Commission to court, hoping to reverse the agency's order. But the federal court could only ask the commission to reconsider its decision. By the time alternate sources of natural gas were located, AMPRO had spent $3 million and the plant opening was delayed by three years. The supply bottleneck caused First Mississippi to step up its work in the oil, gas, and minerals exploration businesses. In 1978 these businesses were grouped under a subsidiary called First Energy Corporation. A year later, after formally including oil and gas into its list of primary businesses, a second energy crisis occurred, resulting from the overthrow of the Shah of Iran.
During this time, First Energy Corporation made a huge strike at the Irene Field in Louisiana's Tuscaloosa Trend. The company set up a series of wells on the site that proved to be extremely productive. Once again, First Mississippi had a highly profitable resource that it could use to help build other operations. The strike could not have come at a better time. The FirstMiss plant at Fort Madison had gradually become obsolete during the 1970s. In addition, export markets for American fertilizer manufacturers dried up and modern, more efficient competitors emerged. Unable to compete without massive and costly upgrades, FirstMiss was forced to close its Fort Madison plant in October of 1981.
While the bulk of First Mississippi's company-building profits were now coming from the Irene Field, the search went on for other promising ventures. Dedicated to expansion in the oil and gas business, First Energy looked for more unexplored fields. Southeastern leases, where the company hoped to look first, had been thoroughly picked over. Instead, First Energy turned to the vast unexplored tracts in the Rocky Mountains and leased 700,000 acres from the Emerald Oil Company. The exploration effort was later increased to cover more than 1.5 million acres of land. As a result, oil and gas revenues climbed from $7 million in 1976 to $50 million in 1981.
Mineral exploration also continued to grow. A massive armament program, launched during the final year of the Carter Administration and amplified by President Reagan, created a high demand for precious metals and "strategic minerals." First Mississippi bought mineral leases in 1980, beginning with a 9,000-acre claim in New Mexico called the "Silver Bar," which it acquired in a surprise move over the Christmas holidays when other bidders were on vacation. The exploration of coal, a bridge between the mineral and energy businesses, was a high priority for First Mississippi, particularly as the past energy crisis--and the virtual moratorium on nuclear power plants--served to increase the demand for coal.
In late 1981, after considering more than 100 claims, First Mississippi decided to purchase the Pyramid Mining company based in Owensboro, Kentucky. In addition to providing greater diversification, Pyramid's coal reserves were estimated at about 100 million tons. While revenues in the 1980s tripled over those of the previous decade, net income was erratic. Attributing this to mere overcapacity in fertilizer and other markets, First Mississippi pressed ahead with further acquisitions. The company purchased interests several high-technology enterprises, including the International Genetic Sciences Partnership, the Technology Applications Services Corp. (now Plasma Energy), Imperial Technology Kellwyn, Inc. and the Opti-Rad partnership. In addition, the company moved into insulation products, and the mineral extraction group brought First Mississippi into the gold mining business.
In 1989 First Mississippi recorded its best performance to date. But by this time it had become apparent that much of this success was due to temporary conditions and could not be sustained. Convinced that the strategy of growth through diversification could not provide stable growth, Kelley Williams decided to gradually spin off every venture that was not compatible with First Mississippi's core businesses. First Mississippi wound down its coal mining and industrial insulation operations and most of its high-technology ventures. (The Pyramid mine, which lost $3.8 million in its last two years, was closed because of low demand arising from industry preparations for federal Clean Air Act compliance.) With the businesses it retained, First Mississippi consolidated its Plasma Energy unit with Callidus Technologies to achieve better economies. Continuing its shift toward core chemical operations, First Mississippi purchased a Dayton, Ohio chemical plant from Monsanto, and reached a long-term contract to supply American Cyanamid with a key herbicide ingredient.
In many respects, First Mississippi's move back to related chemical operations mirrors the reorganization that occurred 30 years earlier. Having discovered that its nonrelated businesses actually declined in tandem, First Mississippi decided now, as it had then, that it would stick to those businesses it knows best.
Principal Subsidiaries: First Chemical Corporation; Quality Chemicals, Inc.; EKC Technology, Inc.; FirstMiss Fertilizer, Inc.; AMPRO Fertilizer, Inc.; Triad Chemical, Inc. (50%); Pyramid Mining, Inc.; First Energy Corporation; FEC Marketing, Inc.; FRM, Inc.; FirstMiss Gold, Inc. (81.9%); Callidus Technologies, Inc.; FirstMiss Steel, Inc.; Industrial Insulations of Texas, Inc.; Plasma Energy Corporation; Plasma Processing Corporation; SCE Technologies, Inc.; Star Corrosion & Refractory, Inc.; Power Sources, Inc. (50%).
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