Opinion ID: 107402
Heading Depth: 1
Heading Rank: 2

Heading: The merger, its background, its participants and relative position.

Text: The Penn-Central merger has been under study and discussion by the Commission for some 10 years. After the initial study was completed in 1959, Central withdrew from the plan and began negotiations for a merger with the Chesapeake and Ohio Railway Company (C & O) for joint control of the Baltimore and Ohio Railroad Company (B & O). However, when at a later date C & O had contracted for the purchase of some 61% of B & O stock, Central gave up its plan and renewed negotiations with Penn. The two roads signed an agreement of merger in 1962. The New York, New Haven and Hartford Railroad Company (NH) approached Penn and Central for inclusion in the plan but was given a deaf ear. The merger agreement provided that all properties, franchises, etc. (permitted by respective state law), would be transferred to the merged company and appropriate stock exchange, debt arrangements, etc., effected. As the Commission found, the merger would create an hour-glass shaped system flared on the east from Montreal, Canada, through Boston, Mass., to Norfolk, Va., and on the west from Mackinaw City, Mich., through Chicago, Ill., to St. Louis, Mo. 327 I. C. C., at 489. It would operate some 19,600 miles of road in 14 States between the Great Lakes, with a splash in Canada on the north, and the Ohio and Potomac Rivers on the south. After the two systems are connected as planned and new and expanded yards are provided, the merger will consolidate trains now moving separately between the same points. The combined systems will have a substantial amount of parallel trackage and routes, with 160 common points or junctions. Terminals will be consolidated, present interchanges between the two systems will be eliminated and only the most efficient yards and facilities of the respective systems will be utilized. The merger plan calls for 98 projects that will intermesh their long-haul traffic at key points, creating a nonstop service between the principal cities with locals covering the multiple-stop routes and branch lines. It is estimated that enormous savings in transit time can be effected. Certain chosen yardssuch as Selkirkwill be remodeled and modernized into electronically operated yards with capacities of from 5,000 to 10,000 cars per day. The through trains to the West will be formed at Selkirk and those from the West broken up for dispatch to terminals or consignees in New England, New York, and northern New Jersey. The plan calls for some New York City traffic to be routed over Central's Hudson River East Shore line to lessen cost. By consolidating traffic on fast through lines, filling out trains, re-routing over the most efficient routes, eliminating some interchanges and effecting other improvements, the merged company will reduce by 6,000,000 the number of train miles operated. A single-line service will be operated between more points, with less circuity and less switching. The plan also calls for 31 daily trains to be withdrawn from the Pennsylvania with seven new ones added, leaving a total of 319 trains daily. The Pennsylvania is the largest and Central the third largest railroad in the Northeastern Region. Together the operating revenue of the two roads was over $1,500,000,000 in 1965. Their net income in 1964 totaled almost $57,000,000 and in 1965 ran in excess of $75,000,000. In 1963 the total net was barely $16,000,000. The cost of operation of the two systems runs $90,000,000 a month and their working capital was some $72,000,000 in 1965. As of December 31, 1963, their combined investments were $1,242,000,000. The Pennsylvania and Central systems are each made up of underlying corporations. As of the date of the Examiner's Report the merged company would have ownership interest in 182 corporations and 10 railroads under lease. Thirty-six of the corporations are rail carriers, in six of which the merged company would have a voting control. All six are Class I railroads. It would likewise control six Class II railroads, five switching and terminal railroads, a holding company, five car-leasing companies, four common carriers and 34 noncarrier corporations. The NH [2] is the sixth largest railroad in the North-eastern Region and the largest in New England. On a national basis it ranks fourth among passenger-carrying railroads and is one of the largest nontrunkline freight roads. It has some 1,500 miles of railroad in four StatesMassachusetts, Rhode Island, Connecticut, and part of New York. NH has been in reorganization under § 77 of the Bankruptcy Act, 47 Stat. 1474, as amended, 11 U. S. C. § 205, since 1961. [3] While its gross revenues have run in excess of $120,000,000, it has run deficits since 1958. During the trusteeship its deficits have run from $12,700,000 in 1962 to $15,100,000 in 1965.