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ROY C
MEGARGEL
I had long thought
that Roy C Megargel the Wall Street Investment Banker and 2nd
owner of Pepsi-Cola, just might also be the Roy C Megargel ,
Railroad Tycoon, President of the
GULF,
TEXAS AND WESTERN RAILROAD. After several years I finally
stumbled across a copy of “Twelve Full Ounces” by Milward W
Martin who had been Head of the Pepsi’s legal Dept for 25 years
and author of “Was Shakespeare Shakespeare? A Lawyer reviews the
evidence”. Finally there it was... the confirmation I had
been looking for, as I read I discovered there was more to Roy
Chester Megargel than the footnote history assigned to him.
In 1922 owner,
manufacturer and creator of Pepsi-Cola, Caleb Bradham and his
stockholders entered a reorganization agreement with the Wall
Street firm of R.C. Megargel & Co, 27 Pine St, New York City.
However the deal never quite worked out, they simply couldn’t
generate the stock sales needed to save the company. By spring
of 1923 Pepsi Cola was bankrupt.
Roy C. Megargel on
the other hand, was not willing to let it go, he believed in
Bradham’s dream and purchased for $35,000 the Pepsi Cola
trademark and business under his newly created Pepsi Cola
Corporation. Pepsi had always been manufactured in New Bern
N.C. Megargel’s first order of business was to move his
operation to a warehouse at 1224 West Broad Street, Richmond
Virginia. For the next eight years from 1923 to 1931 the
concentrate was manufactured Richmond as he struggled to keep the Pepsi name alive.
As a younger
man Megargel during his railroad days he had been involved in
the financing and building of the
GULF, TEXAS AND WESTERN RAILROAD.
AT heart he was basically a
finance man, a successful Wall Street Invest Banker. Sadly,
what he lacked was marketing skill. He invested substantial
sums of money, but without the volume sales and no advertising,
the operation floundered, in fact from 1923 to 1928 the
corporation lost money every year. Roy C Megargel covered the
corporations deficit’s out of his own personal funds. In 1928
he restructured again, this time under the “National Pepsi Cola
Corporation” In hopes of boosting the sakes of stock shares;
some of the stock sold but not nearly enough. Not able to
generate the funds he needed, Megargel continued as he been,
making up for loses out of his own pocket.
The stock market
crash of 1929 left Megargel unable to continue in his role of
Pepsi’s savior by covering losses for the corporation as he had
been doing. By 1931 the Corporation owed 16,000 in unpaid
taxes, over $52,000 to Megargel’s personal account and yet
another $50,000 to other creditors, it was the end.
On June 8, 1931,
in the United States District Court for the Eastern District of
Virginia, National Pepsi-Cola Corporation was bankrupt for the
second time in the company’s history.
Even that was not
enough to stop Roy Megargel, he went out and found Pepsi’s next
owner Mr Charles Guth and helped him to broker the deal.
Pepsi-Cola would live but under a new roof. The new Pepsi Cola
Company would be set up under Delaware law with 300,000 shares,
with 100,000 of the shares going to Megargel, along with a
$25,000 annual royalty. However, By 1933 he had still never
been paid a royalty. He sued for $11,000 in back royalties even
though it was clear he was owed much closer to $70,000. Roy
also knew that $11,000 was all the market would bear and even
that might put the company close to bankruptcy again. They
never made it to trial. Guth made a counter offer to settle out
of court for $35,000 then the bomb dropped, he would have to
return his remaining stock and sign legal releases from all
claims. .
Even though after
his bankruptcy had no obligation, out of his 100,000 shares of
the new company stock, he had given away 2,500 shares to
investors of his old “National Pepsi Cola Corporation” on a
“share for share” basis. Of the 97,000 shares left he
registered 50,000 shares in his wife’s name and a additional
2,500 shares in his brother’s name.
Guth
wanted those 97,000 shares and so Roy signed over his all his
stock and signed the release to all claims against the company.
Guth had won… Except, it was later discovered that no one had
ever asked for or offered a release signed for by either Roy’s
wife or brother.
Roy C Megargel was
obviously a man of great vision, and integrity. Without his
efforts it’s doubtful the Pepsi Cola name could have survived
those eight dark years. He kept his faith in a
product that bled his pockets year after year. But he stayed
true to his belief, stayed true to his investors, and ultimately
stayed to true to both his and Caleb Bradham’s dream.
Roy died at the age of 58 at
Doctors Hospital, New York on June 15th 1935. His widow
was Margery Knowles of Richmond Va whom he had married in 1909.
He was also survived by his brother Ralph G. Megargel. Roy
Megargel was a native of Scranton Pa and graduated from the
University of Michigan in 1901. Additionally he had been president of the Southern NY Power and Railway
Company and a
director of the Andes Power Corporation. He was a member
of the Beta Theta Pi fraternity and had belonged to the Lawyers
Club and St Nicholas Society.
Roy's brother, Ralph G.
Megargel passed on 4 months later in Oct of 1935. Ralph
left behind a son named after Roy. Roy C Megargel
2nd. He graduated Dartmouth College in 1952 and went on to be the vice president of the Hewitt-Robins
division of Litton Industries.
It was reported in the New York
Times on Oct 29th 1939 that Margery K Megargel, widow of Roy C
Megargel was paid $240,000 in a settlement. It was alleged she had
been defrauded of 95,000 shares of Pepsi-Cola stock. It
appears the Margery's brother Irving C Knowles may have settled
as well.
What I have not to
mentioned is there exists a North Texas town named for Roy C
Megargel and still bears his name, Megargel Texas. I hope this will be a fitting
tribute to a little known figure in Pepsi’s history. Thanks
Roy!
PART 2
ROY'S
LEGACY, MEGARGEL TEXAS
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