Wheel of a Deal

When Texans Clint Murchison and Sid Richardson bought 800,000 shares of New York Central Railroad stock last March, it did not look as if they would hang on to it very long. The deal gave them the right to sell half of it back to Robert R. Young's Alleghany Corp. and to Young's crony and financial angel, Allan Kirby, at the same price they had paid: $25 a share. Last week they did sell a big chunk of the stock. Richardson sold 200,000 shares to Kirby, thus repaying the $5,000,000 that Kirby had lent him to buy the stock. Another 300,000 shares, in effect, went to Alleghany Corp. for $7,500,000, the money going to repay a bank loan the Texans had made for the stock purchase. Since the stock was selling for about $23 last week, Kirby and Alleghany lost around $1,000,000 on the deal. But it was only a paper loss, since they merely lent the stock to Murchison and Richardson to vote for Young in the Central proxy fight.

Then Alleghany turned around and made a new deal with the Texans to put its stock under joint ownership, along with their remaining 300,000 shares (for which Alleghany had lent them the money). Under the contract, Murchison and Richardson will get dividends and the profits from any sale of their 300,000 shares, though the voting rights will be exercised by Alleghany Corp. And the Texans will stand any losses on both their holdings and Alleghany's if they are sold at a loss.

Why all this complicated maneuvering? The reason, said Murchison, is that "Young is gun-shy." Young feared that if Alleghany had bought the stock outright in the first place instead of lending the money to the Texans, the Interstate Commerce Commission would not let him vote it in the Central fight. His fears proved baseless, since ICC later ruled that Alleghany could have bought the stock itself.

For their favor to Young, the Texans now have 300,000 Central shares that cost them nothing out of their own pockets. They expect to hold on to the shares, said Murchison, "until the stock reaches $100. Then we'll take a look . . ."

This file is automatically generated by a robot program, so reader's discretion is required.