Evening star., 1946-04-19
Utility Breakup
May Give Pepco
D. +. Ownership
North American Plan
Coils for individual
Holders of Stock


owned by Washington stockholders
and present individual stockholders
of North American under two plans
before the Securities and Exchange
Commission today.
This became apparent with the
filing yesterday with SEC of a plan
providing for the distribution of all
holdings of the billion-dollar North
American Co. except a Missouri
Illinois company. The history max
Ing breakup plan would outrival in
size the dissolution of the $3.50, 900 900
Standard Oil Co., under a Supreme
Court order in 1911. The plan pro-
posed yesterday was in compliance
with the April l Supreme Court
decision upholding the death SEN
tence" clause of the Public Utilities
Holding Company Act.
Wreco Plan Filed.
The other plan before the SEC
would dissolve the Washington Rail-
way & Electric Co., which now owns
100 per cent of Pepco and so per
cent of the Capital Transit Co.
North American, in turn, owns 80
per cent Of the capital stock of
Wreco, constituting IS per cent of
the voting stock.
Legislation is now pending in the
House to permit the proposed dis
solution of Wreco according to a
plan which would involve the is
suance of new Pepco common stock
against a current earned surplus
and the distribution of this stock
TO the holders of Wreco common
stock in the form of a stock divi-
dend. Because of the present high
value OF Wreco stock the plan calls
Tor a Splitup Of that stock.
Stock Dividends Barred.
Issuance of stock dividends ap-
parently is forbidden in the Dis
trict under legislation of 1913. The
pending bill is in the form of an
enabling act to permit the proposed
dissolution plan.
Hearings have been held on the
measure, but the subcommittee was
requested by the Justice Depart
ment to withhold decision pending
q Court of Appeals decision on
Government challenge of the Pub
lie Utilities Commission electric rate
order of July, 1914.
In its challenge, the Government
contends that the earned surplus
against which Pepco would issue
It's new common stock belongs to
the consumers and not the stock
holders OF the company.
According to j. H. Ferry, vice
president and general manager of
Pepco, the Wreco dissolution plan
probably will be completed before
the consummation of the North
American breakup.
Transit to Be Separate.
Should this be the case, the tran
sit company will be separate from
the power. company and Pepco would
be the owner of the Braddock Light
& Power Co. of Virginia, which
supplies power to the Pentagon and
few other private consumers. 1t
is ultimately planned that full
ownership of the transit company
Will be vested IN general public.
Mr.. Ferry said he understood the
North American distribution plan
calls for the distribution of the
holdings to North American stock
holders in the form of stock divi-
dends.
Thus, he indicated, a certain
amount of Pepco stock would pass
TO these stockholders. He expressed
oount, however, that any Of the
North American stockholders would
be big enough to control Pepco.
POINTING out that Pepco already
has preferred stock locally owned,
he indicated that when both plans
were complete there would be still
considerable local ownership"
Would Keep Two Companies.
If the SEC approves, North Amer
lean would retain directly only the
Union Electric Co. of Missouri and
the Illinois Power Co., which would
be combined to serve 18,4OO square
miles of territory, and the following
properties would be separated from
the system:
The Washington Railway & Elec-
trio Co., Cleveland Electric Illum-
lnatlon Co., Wisconsin Electric Pow
er Co. and ST. Louis County Gas Co.
A new Delaware company would
be formed under the plan to own
other assets of North American,
probably including the West Ken
lucky Coal Co. The North Ameri-
can Light & Power Co., an inter-
mediate holding company. would
be liquidated. North American al
ready had disposed of most or all of
its holdings in Detroit Edison Co.
and Pacific Gas & Electric Co.
Divestment Units to Be Sold.
Under the plan, each share of
North American common would be
converted into one transferable
warrant for the purchase of a "di-
vestment unit" consisting of frac-
tlonal shares in various utility hold
1ngS; one share of common of the
new Mlssouri-Illinois company. and
one share of capital stock of the
proposed new Delaware company.
The divestment units would cost
not more than Sc, the company said
Each would consist of one-fifth of
share OF Cleveland Electric COM
mon, one-fourth of a share of Wis
consin Electric, one-fifth of one par
ticipating unit of common stock of
Washington Railway and Electric
and one-tenth of a share of st.
Louis Gas.
Proceeds of the Investment units
would be used to pay off bank loans
amounting to $50 75( O0O