New-York tribune., 1922-11-16
Effect of Mergers ON Bonds

ousstlonr note that there Is taYis -
s%otn9nlnlns %nr.nnli ths Nsrthern paeiile, Grcaf
quincy, and talk OF c6inbfning thr Nnrtb
ern Pacific and Chicago rsursmtrton d
Quincy. aud also OF Gret, Northern with
soine ether rea6 Great Northern to give
UP oue-half ownership OF Chicago y,ur-
itnRson e Quincy. How does all this az
fnet my two honds--Great Northern Ia
these would rather do II now while
the horse is still In the barn. Please rive
me iiat OF bonds thigh-Frade. yielding
N or per eent) with interest payments
March ana September, June and Decsin-
Der. What are interest dates on Queens
land ss and Standard OH of New yoris
6hsY Are bosh these high-grade? Would
you advise purchase OF French 7As, now
selling at s2?-B C. b.
Answer--Let us state in the first
place that we believe that the possi-
bility of contamination of either Of the
mergers you have in mind is remote.
The merger of two prosperous cor
porations seldom entails the disturb
snce of any of the senior securities.
Bonds of che parties TO merger be-
come the obligation of the enlarged
corporation. In the case of junior se-
curities--that is, the stocks-vthere is
rarely an instance where the issues
OF two merging companies are taken
into the new corporation on equal
| find two companies whose stocks have
exactly the same equity. Assuming,
| Tor the sake of explaining point, that
| the Interstate Commerce Commission
approves the application for the
\ merger of the Northern Pacific, Great
Northern and Burlington, the big ques-
tion will be how many shares of the
new, enlarged corporation will be ex-
changed for q given number of shares
OF each of the three merging compa.
nies. Many merger negotiations have
been carried almost to completion, only
TO be abandoned because of inability
to arrive at what is considered an
equitable basis of exchange. If the
stockholders come to an agreement,
however, they are bound by law to re-
specS the rights of senior security
holders. The owners of bonds cannot
be compelled to exchange their securi-
ties for new consolidated obligation
OF The merger companies. Any
change in the status of senior securi-
ties must be. made only with the con-
sent of the owners of those securities,
We do not think it logical to sell
Great Northern or Northern Pacific
bonds in anticipation of merger.
Peoples Gas and Coke refunding 5s.
due 1897, selling recently to yield
about 81 per cent; Adirondack Power
and Light 6s, due 1860, yielding about
s per cent, and Detroit, Edison SIS, due
1s4s, yielding about 5.s per cent, all
receive interest in March and Septem-
ber. The following receive interest in
June and December: American Tele-
phone and Telegraph IS, due 1946.
yielding about 5.3 per cent: Syracuse
Lighting first bs,. due 1851, yielding
about 5.4 per cent, and Canadian North
ern rs, due 1910, yielding about So per
cent The Queensland 6s pay interest in
February and August and the Standard
Oil of New York 61ss in May and No
vember. We consider both of these bonds
good Investments. French 71as are not
Of the highest grade, but are suitable
for any one who bears in mind that
these and other French external securi-
ties are likely to be influenced market
wise by developments in the European
situation. 1t Is necessary that the pur
chaser make up his mind at the outset
not to be stampeded into selling every
time the bonds appear weak. J.,