Evening star., 1949-07-10
Capital Puzzled
BY Transit Bid
of Florida Group
Other Reasons Than
Investment Cited as
Motives for Offer
By Froncis P. DouqIos

washington nnanclal circles
are trying to unravel what they
regard as a prime mystery: Why
does group of Florida business
men want to invest $2,189,160 in
the Capital Transit Co.?
The 109,458 shares of Capital
Transit stock that the North
American Co. has contracted to
sell to the Florida group has been
open to purchase for some time.
No individual or group in WASH
ington made an effective move to
acquire the stock.
The pending transaction calls
for a price of $40 a share. There
are some who believe that price
is too low. But others who re-
gard the deal as puzzling point to
these circumstances:
In 1947 the company ended the
year with a deficit of $90,63l.
This year so far it has paid 81 q
share in dividends, but last year
1t paid only so cents.
Wage Negotiations Up.
The company now has wage
negotiations pending, and E. D.
Merrill, president. has said that
an increase of 1-cent an hour In
the wage level means an increased
cost of $115,000 a year.
The union has asked for an in
crease of rs cents, an hour and
other benefits calculated at 8
cents. An increase even OF 5
cents would amount to $575 5000 a
year under Mr.. Merrill's formula.
That is about s185, 900 more than
the company's net income OF
$390,6 for last year.
Although an increase in wages
would logically be followed by an
increase in fares, such a fare in
crease would follow the effective
date of the wage increase by
several months. And there is q
question whether higher fares
would not run into condition
Of diminishing returns in which
the number of riders would drop
to such an extent that the fare
increase would yield less profit
than ordinarily would be ex-
pected.
S2,OOO,000 Garage Planned.
Still another consideration Is
the company's need of new ga
rage in which to center mainte-
nance of its 1.100 buses. Plans
for the new garage on Brentwood
road near Ninth street NE. are
about at the blueprint stage. The
cost is put at upward Of $4,000. 900.
That would make big dent in
the company's cash position.
There is no denial that there IL
considerable value behind the
transit shares. Herbert c. Free
man, president of North Ameri-
can, put the book value at almost
exactly $120 a share" Also, the
company has a valuation for a
rate base of about $30.000,000.
which does not include assets not
counted in when it comes to fixing
fares. After the 100000 first
mortgage bonds. that S30,000.000
amounts roughly to about $85 q
share.
Dividend Record Cited.
Why the market value of the
stock has been depressed is laid
to the dividend record and pros
poets. The company earned SUBJ
stantial sums during the war, but
plowed much of them back. Divi-
dends have never been more than
50 year and were cut to so cents
last year.
Despite all these things, repre-
sentatives of the Florida group
headed by L. E. Wolfson of Jack
sonville have stated publicly that
the motive behind the purchase
of the stock is investment.
Mr.. Wolfson, a partner in Wolf
son Bros, Jacksonville mill
supply house, has contracted to
buy 50,458 of the shares held by
North American. His three
brothers, Sam w.. Saul and Cecil
Wolfson, are to purchase 12,500
shares each.
Five other members of the
group are down for the rest of the
109.458 shares. The total Is 45.61
per cent of the 100000 shares out
standing and amounts to effective
control of the company.
]. A. B. Broadwater, president