Koch Industries: The most important company you may not know

Diverse corporation tied to multiple industries

By Chris Isidore, CNN Business
Copyright 2019 CNN

David Koch, 79, the billionaire industrialist and GOP backer, died August 23, 2019.

WICHITA, Kan. - Koch Industries is unlike any other company.

There is no other business so closely held by one family that is also so big and so diversified.

David Koch, 79, who died Friday, and his brother Charles, 83, have owned the company since their father passed away in 1967.

Koch Industries started under the name Wood River Oil and Refining Company in 1940. It is still a major player in the oil and gas field. But it has expanded into a sprawling conglomerate that makes a wide range of products. Some Koch products are found in virtually every US household, said Christopher Leonard, author of the new book Kochland.

"That sounds hyperbolic, but it's true," said Leonard. "They make sensors inside your smartphone. They make window glass. They make building materials in the walls of your house. Fuel. Fertilizer. Toilet paper. They make Lycra, Dixie Cups. Brawny Paper Towels. They're the engineers operating just below the surface."

Because it is private, Koch Industries does not report earnings or sales. According to Forbes, it had annual revenue of $110 billion in 2017. That's about the same revenue Microsoft reported for 2018.

The only privately-held US company that is larger is food giant Cargill, which had about $5 billion more in revenue last year. But Cargill is much more focused on a core business, and at the same time far more widely held than Koch Industries.

While David retired as No. 2 at the company last year due to health issues, Charles has remained CEO, and shows no signs of letting up.

Charles has been the driving force behind the company. "David Koch was more along for the ride," said Leonard.

They were offered the chance in the early 1980s to take the company public and have a huge initial payday. They turned it down.

Leonard said the brothers wanted to maintain control, and the secrecy that was only possible if it remained privately held. "They probably would have gotten more cash upfront if they had gone public, but over the long-term they probably made more money by staying private," he said. "David Koch owned 40% of the company. That wouldn't have been possible if it was publicly held."

Private ownership also allowed them to run the business the way they wanted, without worrying about investor reaction to rising and falling profits.

"They didn't want Wall Street looking over their shoulder," Leonard said.

And so, for many years, the company kept a very low public profile. That only started to change in the last five to ten years, as the brothers' political contributions and lobbying brought more focus to the family name and the company.

"They realized their name as far as it was known, had become very toxic," he said. So, they started a modest advertising campaign to try to burnish the reputation of the Koch Industries name.

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