Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-02-12

balanced capital structure; at present
it has too large a ratio of bonds to
stock.
Minority stockholders of Erie and
Pere Marquette will hold their pres
ent shares and will not be offered any
basis of exchange into stock of the
holding company. Under the plan, the
Nickel Plate will sell to the Chesa.
peake and Ohio all its holdings of the
Pere Marquette. The Nickel Plate
will, for the present, retain it's large
stock holdings of Chesapeake and
Ohio. When and if the Nickel Plate
and the Chesapeake and Ohio are
later joined, the problem of the dis
position of the Nickel Plates holdings
of the Chesapeake and Ohio will come
up. If the Chesapeake and Ohio is to
remain the parent company, 1t Will
face the dilemma of not being author
lied under the law to buy it's own
stock.
Minority Delays Negotiations.
The Van Sweringens would have
liked to have announced this second
plan six months ago, but the opposi-
ton of minority interests delayed ne.
gotiations. Last March many outsid-
ers, who do not know at first hand the
tremendous energies and determine
who once had a newspaper delivery
route in Cleveland before becoming
millionaire realtors and railway oper-
ators, predicted that the whole merger
idea would be abandoned as a result
of the rejection of the first petition by
the Interstate Commerce Commission.
Now the second plan has been laid
before the Interstate Commerce Com
mission, the supreme court in trans
portation matters, and another series
of hearings will be held at Washing
ton. No doubt new opposition Will
spring from some minority interests
who have not yet been placated.
Advocates Of the new plan assert
that Chesapeake and Ohio. whence the
opposition to the first plan came, gains
from getting important feeders and
allies who can not only take bitumi'
nous coal from it and carry 1t TO
places where 1t is consumed but can
also bring a return flow Of freight
for distribution in the Chesapeake
and Ohio territory.
The Erie, it is pointed out, gives
! the Chesapeake and Ohio the benefit
| of it's high property value, which may
save money to the system by putting
off the point Of recapture of excess
earnings by the Government. Under
| the transportation act of 1920, rail-
roads must turn over to the Federal
Government half the earnings in eX-
cess of per cent of property value.
| Chesapeake and Ohio by itself has
! high earning power and compare
| lively low property value. Erie has
high property value and lower earn
! ing power. The comparatively low
| earning power is OFFSET by marker
price, inasmuch as Chesapeake and
4 70
cents on the dollar. Chesapeake has
Ian option to buy the Erie holdings OF
| o. p. and NJ. j. Van Sweringen. SAID
| to total 343, 900 shares, at a price de-
termined by a committee chosen by
| the directors.
Bernet Now with Erie.
TT Rernet, who built up the Nickel
plate for the Van Sweringens, recent
Iv switched to the Erie and Is under
| taking to do an analogous job for the
! Erie. The physical condition OF the
| nropertv is said to be good. having
been improved by substantial main
tenance expenditures for a period OF
wears. Under the new management,
significant changes Of equipment WI
be made and, in addition to speeding
up freight movement, this gives nope
of substantial economies In main
|
agement Is not promising overnight
results, but in two years the effect Of
the new policies ought to be measur
able. it is said.
The purchase of control of thu
| Wheeling and Lake Erie jointly BY
\ the Nickel Plate. the New York Cen
trail and the Baltimore and Ohio Is II
accordance with the four-systen plan
which was publicly announced in thu
| 80 yH1Q
business of the East was to be divided
into four great trunk systems--th'
Pennsylvania. the New York Central
the Baltimore and Ohio and the Nicke
Plate. The plan was supported b!
three roads involved, but opposed b!
the Pennsylvania, which contendet
:. that it's relative position in the fell
, Twas not definitely assured by tn
|, merger program .-.--4--4--.------.--