Babes Out of Woods

On the 67th floor of the RCA Building in Manhattan's Rockefeller Center is the breezy Rockefeller Center Luncheon Club. There one sweltering day last week, after a few rounds of cool Budweiser, some 35 financial newshawks sat down at a long table as the guests of Robert Ralph Young, amiable spokesman-member of the trio which bought control of the Van Sweringen railroad empire from George A. Ball, the Muncie, Ind. fruit-jar tycoon (TIME, May 3). It was quiet Mr. Young who described himself and his two partners--Allan P. Kirby and Frank F. Kolbe--as "just babes in the woods." Last week the "Babes" started out of the woods. Before the luncheon in Rockefeller Center the directors of Alleghany Corp. and The Chesapeake Corp., most substantial trees in the dark forest of Van Sweringen holding companies, met in Mr. Young's swank Park Avenue apartment, voted to merge the two in a new Chesapeake Corp. (no "The").*

Originally the plan was to use the ax on Chesapeake, retaining Alleghany, which was the company the "Babes" bought from old Mr. Ball. But of the two, Chesapeake had a far better name with the public, and Messrs. Young, Kirby & Kolbe have demonstrated an uncommon flair for public relations. To newshawks last week Mr. Young handed photostats of the chart used by the Wheeler committee during the Washington hearings on the Van Sweringen empire. Through all holding companies which have been, or would be, segregated or eliminated on completion of the Alleghany-Chesapeake merger, Mr. Young had drawn heavy black lines. Crossed out were 17 non-railroad holding companies and Midamerica Corp., the tiptop unit set up by Mr. Ball. Today The Chesapeake Corp. owns about 35.5% of the stock of Chesapeake & Ohio Railway Co., and Alleghany owns 71% of the stock of The Chesapeake Corp. After the merger new Chesapeake Corp. will be the holding company for all the railroad properties, only one step removed from the rails.

As far as old Chesapeake is concerned, the merger offers no complications. It has only common stock outstanding, and its shareholders will be offered the choice of either one and one-half shares of the Chesapeake & Ohio Railway Co. common stock, the holding company's principal asset, or one share of a prior preferred stock in the new company. Alleghany's capitalization is more complicated--common stock, two issues of preferred, three bond issues. Two of the bond issues will be assumed by the new company. Holders of the third issue, the famed 5s of 1950, will be offered $200 in cash, $800 in preferred stock of the new company for each $1,000 bond. Holders of Alleghany prior preferred will be offered $7.50 in cash and one-half a share of new prior preferred. For Alleghany's old preferred, which owes approximately $34 per share in accumulated back dividends, one new share of non-cumulative preferred will be offered, together with warrants to buy new common at $5 per share. Alleghany common will be swapped share-for-share for new Chesapeake common.

* The brokerage business being what it now is, Mr. Kolbe is about to retire from the New York Stock Exchange firm of Young, Kolbe & Co., devote his entire time to his railroads. Mr. Young will carry on as Robert R. Young & Co., in which his wife, Anita O'Keeffe Young, sister of Painter Georgia O'Keeffe, will be a special partner.

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