Evening star., 1942-04-09
Pepco Merger
With Holding
Firm Planned
Proposal Revealed
At P. U. c. Hearing
On Stock Issue
BY DON s. WARREN.

Merger of the Washington Rail-
way 81 Electric Co. and its subsid-
iary, the Potomac Electric Power
Co, is being planned by officials of
the companies, the Public Utilities
Commission was told today as COM
panw and commission representa-
tives battled over a proposed $3,OOO,- :
600 Pepco stock issue to its parent
company to raise needed funds.
Also involved in plans for the con-
solidation is the Washington g.
Rockville Railway Co., of Mont
gomery County, which, like Wreco,
Is holding company.
Plans for the consultations were
outlined briefly by William K. Laws,
Pepso counsel, as he asked the COM
mission for approval of the company
petition to sell 10000 shares of COM
mon stock to Wreco at 500 par per
share. Mr.. Laws referred to the
Holding Company Act of 1885 under
which the Securities and Exchange
Commission is seeking to eliminate
unnecessary" holding companies
and added: There Is no economic
justification for the existence of
Wreco."
North American Question Raised,
There were recurring battles at
today's hearing over insistent in
quiries made by Commission Chair
man Gregory Hankin into connec-
tions Of the North American Co., a
giant holding corporation, with
Washington utilities, in relation to
the proposed Pepco stock issue
North American OWNS 1856 per cent
Of the voting stock common stock
OF Wreco and Wreco owns all Of the
common stock Of the power company.
A. G. Neal, president OF both
Pepco and Wreco, in stressing the
need for capital for expansion,
largely due to war demands. said the
company would need $50, 900 900 in
the next three years for expansion
and capital improvements. For the
flrst six months Of this year, he said.
the power company has need OF
funds for financing expansion prof.
ects costing $4,263, 900. He said ma
terials are being made available for
this schedule, but that there may
be question as to how much ma
terial will be available thereafter.
Would Bring More From Public.
Chairman Hankin has raised the
question as to whether the sale of
the 10000 shares OF Pepco stock to
its parent company, under a waiver
Of the commissions competitive bid
ding rule on utility stock issues,
would constitute q stock dividend"
to the extent Of the stock value
above 500 par per share.
He has argued that the 80 1000
shares, If sold to the public, might
bring in something near SIS OOO, 900,
instead Of $4,000, 900, the price pro-
posed in the companies petition.
Mr.. Hankin brought the North
Co. into the hearing by
asking what would become OF stock
holders If the p. U. c., or the S.
E. c. or the courts held, at some
future time, that the North Ameri-
can holdings in Wreco were con-
trary to the La Toilette anti-merger
law, which forbids any foreign"
corporation to buy or own securi-
ties of Washington utility concerns,
and that therefore, present holdings
were ruled null and void.
He tied this in with the proposed
stock issue on the assumption that
if the commission permitted the
sale of the 80 1000 shares by Pepco,
Wreco later might sell this stock to
the public and give resulting re-
turns to North American.