Bid for the North Western

A rambunctious newcomer among Midwest railroaders is Chicago Lawyer Ben W. Heineman, 42. Less than two years ago, he won a proxy fight for control of the Minneapolis & St. Louis Railway, has since boosted earnings per share 14% to $2.35. He is also trying to outbid the Santa Fe and the Pennsylvania for little Toledo, Peoria & Western Railroad, a main bypass around Chicago for transcontinental freight. Last week Heineman announced that he is after a much bigger prize: the long (7,870 miles) and longtime ailing Chicago & North Western Railway, which runs from Chicago to Lander, Wyo.

The North Western has paid no dividends on its common stock since 1950, and recently lost to the Milwaukee road its 66-year-old agreement with Union Pacific to bring transcontinental passenger trains into Chicago from Omaha. While most railroads turned in impressive earnings records last year, the North Western did not even make its $5 preferred dividend. Heineman wants to jack up the management, eventually arrange a merger of North Western and the Chicago, Milwaukee, St. Paul & Pacific Railroad, save perhaps $30 million yearly by the consolidation.

In his bid for the North Western, Heineman has a powerful hand. He and his associates already control 465,000 shares in the company, and are buying another 100,000, giving them about one-third of all outstanding stock. Four of his backers,* said Heineman, are "dissatisfied shareholders who came to me on their own initiative." In addition, Heineman said, he could count on 225,000 shares in the name of Bear, Sterns & Co., other investment houses, "and certain of my friends and business associates." Heineman asked the North Western directors for ten seats on the 18-man board, the title of board chairman and chief executive officer, threatened a proxy fight to get control if he is turned down.

Heineman may have a tough time getting control. Because of North Western's staggered system of electing directors, only six come up for election at the annual stockholders' meeting in May. He would have a hard time winning more than four, because the present management can concentrate its votes under the road's cumulative voting system. Most important, Heineman's backers, who have promised to stick behind him in his bid for power, might not stick by him in an all-out proxy fight. Nevertheless, at week's end, the North Western board decided to try to reach a compromise with Heineman.

*Portland, Ore. Investment Counselors J. Henry Reiser & Co. (80,000 shares), Chicago Financier Franklin Lyons (60,000 shares), Baltimore Investment Counselor Henry Howard (50,000 shares), Louisville retired Broker Clarence K. Reynolds (50,000 shares).

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