C.& S. Divides

The eight-year fight between the New Deal and Commonwealth & Southern Corp ended last week. The $1,143,160,279 holding-company system threw in the towel, announced it would comply with SEC's interpretation of the "death sentence" by integrating its sprawling system. To those who wondered how big holding companies could unscramble without destroying stockholder equities, the C. & S. plan was soothingly simple: pay off the C. & S. preferred by giving it common stock in subsidiaries to be dropped.

There are four Northern subsidiaries, the cream of the system--Ohio Edison, Consumers Power, Central Illinois Light, Pennsylvania Power. They account for about $80,000,000 of C. & S.'s $152,000,000 gross, but for $11,861,604 of its $13,048,510 earnings. C. & S.'s preferred stockholders (about 18,000 private investors) are owed $29,250,000 in back dividends. But when their share of the integration spoils was announced, the price of the preferred touched a new 1941 high at 64. As for the 163,000-odd C. & S. common shareholders, they become sole owners of the Southern properties (which might constitute an integrated operating unit), stand a long chance for dividends--the first since 1932.

This week it looked as if preferred shareholders (not to mention SEC) might not O.K. this plan. Reason: in either "voluntary or involuntary liquidation or dissolution" the preferred is entitled to $100 par value plus accrued dividends. That gives C. & S. preferred a theoretical value of $119.50, almost twice the market price.

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