A Case of Informal Deal: Merger of Turkish Sugar Companies in 1935

Abstract

Sugar, which causes political tensions, has been the subject of many studies in the history of Turkey. Especially, the first half of the 1930s was a period when this tension was felt the most and the problem was brought to the newspapers and the parliament. The year 1935, when the sugar companies were merged, was a turning point in terms of the debates. The new company established as a result of the merger and the price reduction created a strong legitimization ground for the government. Nowadays, the issue of merger is frequently analyzed in studies on sugar companies. Even today, it is possible to see the affirmative power of the legitimacy ground created in these studies dominated by a developmentalist language. However, the 'merger text' that is the source of the studies in the literature does not have a legal record. Moreover, Law No. 2785, the only legal regulation associated with price cuts and mergers, is neither related to prices nor to mergers. This study argues that the merger of sugar companies was a de facto capitalization transaction, a bargain-based financial operation carried out in the informal field. The illusion created by the aforementioned unrelated law provided a perception of legitimacy to the extent that it rendered invisible the informal bargain with the shareholders of the companies, while on the one hand, it ensured a price decrease accompanied by strict measures. This informal bargaining process, in which the value increases achieved through capitalization were redistributed among shareholders, was formalized through the establishment of Türkiye Şeker Fabrikaları A.Ş.