Evening star., 1921-05-20

an exchange Of the 10000 shares OF
the Capital Traction Company for ar
equal number of shares of common
stock in the merged company: an ex'
change Of the $1,000 shares of the
| Washington Railway and Electric
Company's preferred stock for ar
equal number of shares of new pre-.
| ferred stock having the same dividend
as at present t5 per cent? and the
same preference as to liquidation. 1r
determining the method Of exchange
OF the $4,000 shares of Washington
Railway and Electric Company's com
mon stock for stock in the new OF
merged company the commission ar.
rived at an equity value Of $3.0S5.751.S: 8:
Tor those $1,000 shares or s47.473 pei
share.
These $1,000 shares would be ex.
! nanged at the per share value OF
$47.4'3. for 3O.s5S shares of common
STOCK in the new or merged company
share with the 10000 shares of the
capital Traction Company's stock
Both the new common stock and the
new preferred stock to have full voting
power. share for share
Returned rs Unacceptable.
AT one Of the meetings Of the con-
1erees. this plan of the commission was
submitted to the representatives of the
Two companies. and after being studied
by them was returned as unacceptable
1or the reasons indicated in the revised
plans for merger submitted by such
company. quoted in full below:
SECOND MERCER PLAN OF THE
CAPITAL TRACTION COMPANY.
May 12. 1921.
To the Conferees:
In re: Merger:
In the course of conferences held
three suggestions of merger have been
submitted by the respective groups. in
cider following:
First. On behalf of the Capital Trac-
ton Company:
Second. On behalf of the Washington
l>aliway and Electric Company. and
Third. On behalf of the Public Utli-
ties Commission.
Considering these several sugges-
tlons IN the inverse order of their
submission, the conferees Of the Cap
ital Traction Company, respectfully
state that they cannot accept the sug-
gestlon of the utilities commission.
While showing a larger equity and
larger earning power in the Capital
traction Company, and while show
ing also right in that company to
he given participation in possible
future growth and values. the plan
submitted by the utilities comm ission
gives no preference to the stock OF
the Capital Traction Company. but re-
duces it to the level of the common
stock of the Washington Railway and
Electric Company. 1t does not give
to the Capital Traction Company that
status in benefits. that certainty in
return and the security to which it
IS entitled; nor does it provide that
certainly in control which the stock
holders. because of their large equity
IN property and it's larger power. be-
lieve they are entitled to receive.
The Second Suggestion.
The second suggestion-that sub
mitted by the Washington Railway
and Eletcric Company. does not. as
has been already verbally stated
meet with the approval of the con-
ferecs of the Capital Traction Com
nany.
In this suggestion the provision for
the control in direction for a limited
period of the merged company, in
sisted on by the Capital Traction
Company. is resented as wanting in
propriety and justice because as as
serted in the suggestion submitted
the the d.s reproduction value of the Capital
traction Company is much smaller
than that of the Washington Rail-
way and Electric Company
the real property interest of stock
holders is in the equity rather than
in the value OF property. In other
wo"ds. the stock stands behind the
bonded Indebtedness secured upon the
property. and when. according to his
rule the respective values of the
companies are looked into. it will be
found that even allowing to the
Washington Railway and Electri,
Company its claimed value including
such elements of doubtful value as
L-sJi Is.
the Glen Echo amusement property
the Capital Traction Company stock :
holders have larger equity on the
basis of valuation by the Utilities
Commission. and on any other basis
than the Washington Railway and
Electric Company.
The Capital Traction Company has a
very small bond issue. not maturing
until 1947. at low rate of interest.
The Washington Railway and Elec-
trio Company has a very large bonded
debt. some of which is at high rate
OF interest. A large part of this debt
must be refunded within the next few
%ea-s. probably at still higher rate
Of interest. When these factors are
properly analyzed it will be seen that
the value Of their equity is exceed
ngly doubtful
Tnke ThreefoId Position.
In Their suggestion the pos tion
taken by the Washington Railway and
Electric Company is threefold:
First-An offer to lease.
Second-A proposition to merge,
and
Third-The suggestion of belief
that 1T could. and would, purchase the
Capital Traction Company and pay
therefor $50 a share.
The first and third propositions need
not be discussed.
In the second. the proposi ton of
merger. the Washington Railway and
Electric Company states a willing
ness to
accord to the stock of the Capital
Traction Company the same priyi-
leges as enjoyed by the preferred
shareholders of the Washington
Railway and Electric Company;
that is to say. each to have preferred
dividends at the rate of 5 per cent
per annum. with second preference
as to dividends to the stock of the
Capital Traction Company at the