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

ADVERSE NePoTt Dy
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 q
group of Florida businessmen.
Approval of the sale still awaits
a ruling by the Interstate Com
merce Commission.
The SEC announcing its deci-
sion yesterday. stressed that it was
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 Of
capital stock at a price of $40 per
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 its 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 ICC deny its
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 a
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
share of its transit stock for pub
lie sale, only about half OF the
rs 900 shares were bought up.
To the possibility that Capital
Transit, itself. might buy the
stock, the SEC quoted a July Z
letter 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 $l20 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 1o-year period from 1882
! 1948."
Fluctuations Cited.
Fluctuations in the stock earn
ings also ranged from net profit
of $7.29 per share in 1942 to a
| loss of SO cents in 1947, the COM
mission said. It 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:
/. That Herbert c. Freeman.
North American president, testi-
fed the $40 price was "substanti-
ally" higher than any price it
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.
3. That North American has
had mo demonstration Of inter-
est other than from the prospec-
tive purchasers although the
facts regarding North Americans
holdings 's* have long been q
matter of public interest"
1O9,45S Shares Involved.
The SEC ordered North Amer
ican 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,O12 shares of the stock in 1888
at about 500 a share and acquired
LOG, ,466 shares at $40 per share
two years ago, when its subsidiary,
| Washington Railway and Elec-
trio CO., liquidated.
The los. .458 shares, representing
1851 per cent of the 100000
shares Of transit shares outstand-
ing, is all the stock owned by
North American in the utility.
Also involved in the sale are
Montgomery Bus Lines, Inc. and