Evening star., 1949-08-25
SEC Authorizes
Capital Transit
Sa|eto WoIfson
ICC Action on
Adverse Report by
Examiner Awaited

Examiner Awaited
The Securities and Exchange
Commission has authorized. with.
out competitive bidding the pro.
posed sale of a controlling share
Of Capital Transit Co. stock to 6
group of Florida businessmen.
Approval of the sale still await!
a ruling by the Interstate Com.
merce Commission.
The SEC announcing it's deci.
sion yesterday, stressed that it wa!
ruling only on propriety of the
sale by the North American Co
Of New York. and not on any ques.
ton of merit in purchase of the
stock by the Florida group.
Involved are 109,458 shares oi
capital stock at price of $40 pei
share, or a total of $2.189, 160
Closing date for the sale to the
Florida group, headed by L. E
Wolfson, of Jacksonville, is No
vember /.
In it's opinion, the commission
noted North Americans conten-
ton that no Federal agency other
than SEC has jurisdiction over
the sale but that the Interstate
Commerce Commission has "as-
serted jurisdiction" over the deal
Adverse Report Pending.
Pending before the ICC now is
an ICC examiners report. holding
that the proposed purchase by the
Florida group would not be in
the public interest, and recon-
mending that the 1CC deny It's
application.
The examiner, Vernon v. Baker
said two weeks ago that "acquisi-
ton of control of these carriers
by persons so unqualified by
knowledge and experience, and
whose sole purpose is to obtain a
reasonable return on their in
vestment, would present definite
hazards to continue performance
by the carriers of adequate trans
portation service to the public"
The SEC ruling said in effect
that the proposed $40 figure is q
fair sales price, that the sale to
the Florida group can be exempt
ed from competitive bidding, and
that the North American Co. is
complying with an SEC order to
get rid of the Capital Transit
stock.
Opposition Answered.
The SEC also answered several
POINTS of opposition to the sale,
raised at a public hearing.
To the contention that local
groups might bid on North Amer
leans controlling stock to keep the
shares in Washington, the COM
mission said it sis clear from the
record that there has been no
evidence that any persons other
than the prospective purchasers
are prepared to make a firm offer
for the transit stock"
The opinion also pointed out
that when the Washington Rail-
way and Electric Co. "a North
american Co. subsidiary dis
solved in 1947 and offered large
'lare of its transit stock for pub
C sale, only about half of the
5000 shares were bought up.
To the possibility that Capital
transit. itself. might buy the
,ock, the SEC quoted a July 7
tier from E. D. Merrill. Capital
transit president. saying the
board of directors determined
not to make an Offer"
While the book value OF the
stock is about $120 a share, the
SEC said. the $40 proposed is
higher than the market price
which existed at the time the
contract was entered into and is
4.72 times the average earnings
for the 10-year period from 1889
l948."
Fluctuations Cited.
Fluctuations in the stock earn
ings also ranged from a net profit
of $I29 per share in 1912 to a
loss of 80 cents in 1947. the COM
mission said. 1t cited the earn
ings as evidence Of the unreliable
ity of the stocks book value.
The SEC cited these reasons for
waving the competitive bidding
requirements of the agency:
l. That Herbert c. Freeman,
North American president, testi-
fed the $40 price was "substanti-
ally" higher than any price 1t
could expect from bids.
2. That holding companies in
transportation properties prob
ably would be barred by the Dis
trict Code from buying transit
stock.
8. That North American has
had mo demonstration of inter-
est other than from the prospec-
tive purchasers although the
facts regarding North Americana S
holdings have long been a
matter of public interest"
1O9,458 Shares Involved.
The SEC ordered North Amer
lean in, 1912 to get rid of the
stock to comply with provisions
of the Public Utility Holding
Company Act of 1885.
North American bought about
3,012 shares of the stock in 1888
at about $50 share and acquired
LOG, 1866 shares at $40 per share
two years ago, when it's subsidiary
Washington Railway and Elec-
trio Co., liquidated.
The 109, ,458 shares, representing
1851 per cent of the 240,00o
shares of transit shares outstand-
ing, is all the stock owned by
North American in the utility
A1~1 ;,,uo1x,aL ~ tho co1o ore