War for Allegheny?

Financier Allan P. Kirby, boss of Alleghany Corp. since the death of Robert R. Young almost two years ago, got a telephone call last week from another big moneyman. The caller: Boston's Abraham M. Sonnabend, the real estate wheeler-dealer who heads Hotel Corp. of America, Botany Industries, and a fistful of other companies. Could they set up a meeting some time later in the week? Kirby knew why. For months, Sonnabend and a group of associates had been quietly buying Alleghany stock, and they owned some 700,000 shares, or about 14% of the common stock outstanding. They obviously wanted to get in. Alleghany, said the Boston financier, was "an excellent investment opportunity."

It was all of that. Through its stock holdings, Alleghany has 17% working control of the New York Central Railroad, plus 50% ownership of the Missouri Pacific Railroad. The Central also owns more than $500 million in Manhattan real estate, including the Park Lane, Commodore, Biltmore and Barclay hotels, plus several blocks of Park Avenue land. Biggest plum of all: Alleghany's 47.8% control of Investors Diversified Services, which manages five mutual funds whose combined assets total about $3 billion. This great Alleghany complex, says Sonnabend, "has been static since Robert Young died. It needs new vitality and dynamism."

"Bad Faith." The meeting between Kirby and Sonnabend went well enough. Kirby offered Sonnabend a seat on Alleghany's nine-man board; Sonnabend said he would accept. But hardly had the two parted when the deal exploded. Angry telegrams flew back and forth, and words began to fly about a proxy fight for control of Alleghany at the annual meeting next May.

What touched off the fight was some behind-the-scenes maneuvering by Alleghany's Executive Vice President David Wallace, 35, who also acts as trustee to Bob Young's estate and adviser to his widow. Wallace had advised Mrs. Young to support any future Sonnabend bid for control. When Kirby got wind of this piece of advice, the executive committee fired Wallace. Snapped Sonnabend ominously: "An act of bad faith. A violation of a gentleman's agreement to keep Wallace. I decline to serve on the board as presently constituted."

The Key. At week's end, Alleghany Chairman Kirby was trying to make up his mind whether to fight to keep control or not. He owns 524,000 shares of Alleghany common, about 10%, also holds 148,000 shares of 6% convertible preferred and warrants for another 226,440 shares of common. If he converts his preferred and exercises his warrants, he will have close to 1,450,000 shares of common to Sonnabend's 700,000 shares--and the common elects five of the nine directors.

If Kirby decides to fight, the key to his success--or failure--rests with Bob Young's widow, Anita O'Keeffe Young, who owns 100,000 shares of common plus 167,000 shares of convertible preferred. If she converts, she will have a total of 992,000 shares. Added to Kirby's holdings, they will control some 37% of Alleghany's common, and Sonnabend will have a rough time gaining control, though he is prepared to buy another 500,000 shares. But if she throws her vote to Sonnabend, Kirby will be in an even rougher spot. The loss of her vote will be only part of his problem; the psychological effect on other stockholders of Bob Young's widow repudiating the management of a friend of more than 20 years will be incalculable. At week's end Mrs. Young was mum about her feelings. She has long been one of Kirby's staunchest supporters. But then, she is also a good friend of Abe Sonnabend.

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