New-York tribune., 1922-11-12

the st. Raul or the Northern Pacific is
merged with the Great Northern. AS
far as financial stren~th is concerned.
il makes quite a differes.ca to the Mil
waukee q St Paul stockholders whether
they can get the financial strength of
the Great Northern with it's $3.50 ,coO,-
600 of stock, selling at 80, behind the
equities in their property.
Prices for Stocks
| If the Interstate Commerce Commits
| sion should deny the request of the
Northern Pacific and Great Northern to
merge with the Chicago, Burlington &
Quincy, but should favor the Northern
Pacific merger with the C. B. & O., the
question arises, what should be paid
by this combination to the Great North
ern for its one-half ownership of the
capital stock of the C. B. & @.
| Congress has unquestionably the con-
stitutional right to give any railroad
company the privilege Of condemning
the property of another railroad COM
pany, just as any railroad company
now has the right of acquiring any
| piece of property for railroad purposes
by condemnation proceedings, but Con-
| gress under the Constitution has no
right to make any corporation pay the
price for any property beyond what
| the directors of the company may think
is fair price. The property Of the
| G. B. Q. has been valued at about
s6o,o00,00o more than it's present cap
italization. This valuation has not
been accepted yet as adequate by the
company, but assuming that it should
admit that it's property is worth $780,
100000 more than it's outstanding Sc
curities and supposing further that
Congress were to give authority to con-
denim the property for its finally de-
termined physical value, the directors
Of tbs Northern Pacific might not be
willing to pay the go per cent premium
for the G. B. & Q. stock; that is to
say, they might not be willing to pay
$5o,ooo,0oo profit to the Great North
ern for It's half interest in the C.. B,
& @.
II the Great Northern and Chicago
Milwaukee & st. Paul are to be con-
| solidated, how is the value of the
equity of the stockholders in the two
properties to be determined? 1t is
a reasonable assumption that the
s116,ooo,0oo Of Chicago, Milwaukee
& ST. Paul preferred and like
amount Of common stock repre-
/ sents 100 cents on the dollar in
physical property. She same is un-
questionably the case with the $780,
100000 Great Northern stock. The two
classes of stock Of the Chicago, Mil
! waukee & ST. Paul are selling on an
average of about 65 per cent discount
/ which in actual figures means about
$150,00o,000. There is no conceivable
right under the Constitution which
could compel the Chicago, Milwaukee
& st. Paul stockholders to sell their
| property for less than its fair value.
This fair value might be physical value
or a capitalization of present and
future earning capacity. To determine
| this latter factor is an extremely Diff
ficul. proposition.
/ Assuming for the moment that the
Great Northern stockholders in the
/ to accept for their present stock par
4 in stock Of new company, provided
the Chicago, Milwaukee g. ST. Paul pre-
ferred stockholders were to get, say, 65
per cent Of this same stock and the
common stockholders 40 per cent. there
is no way Of making the stockholders
of the latter company accept this
] proposition nor is there any way OF
| making the stockholders of the Great
/ Northern accept stock of any consoli-
dated company except on terms satis-
factory to them.
Steel Corporation Roads
The case OF the. iron ore roads re-
ferred to, running out of Duluth. is
| somewhat different. The stock Of these
| companies is owned by the United
States Steel Corporation and these
| companies have been earning consider
ably more than 8 per cent on their
capitalization over a series OF years.
They are supposed to divide their sur
plus above 8 per cent with the govern
| bent, but the legality of this clause ls
still TO be determined. The writer does
not believe that the Supreme Court viii
uphold this provision because the pres
ent law In effect says that IL any rail-
road should in any year earn more than
per cent 1t must divide the surplus,
but jf Il earns less than 6 per cent u
muss carry all the deficit In other
words, Congress at present SAYS 20 tne