Uncle Charles Defects

To Financier Leopold D. Silberstein, Fairbanks, Morse & Co. looked like a fine prospect for the type of proxy fight that won him Niles-Bement-Pond (TIME, July 25). One of the top makers of diesel locomotives, generators and pumps, Fairbanks, Morse earned $2,478,198 in 1954 on sales of $108 million. But after Silberstein started moving in three weeks ago. Wall Streeters predicted that he would have a tough time overcoming the 30% stock control of the Morse family and management.

Last week the Morse family split wide open. Director Charles H. Morse Sr., 82, agreed to sell his 42,220 shares of stock to Silberstein. Morse also resigned from the board because of his "unalterable opposition" to a proposed share-for-share exchange of Fairbanks, Morse unissued stock (130,000 to 150,000 shares) for the stock of Canadian Locomotive Co., which Fairbanks, Morse controls. Since Fairbanks, Morse book value is $45.90 v. $12.84 for Canadian Locomotive, Morse said that "the exchange will be improvident." President Robert H. Morse Jr. was "stunned and shocked" at Uncle Charles's decision. Said nephew Robert: "I regret that my uncle has seen fit to sell his stock to a well-known financial adventurer. However, the other 9 directors deemed it in the best interests of stockholders to make the exchange. Canadian Locomotive earnings in 1955 were more than double those of Fairbanks, Morse on a per-share basis."

By adding Charles Morse's shares to the 100,000 shares already owned by his Penn-Texas Corp., Silberstein will boost his holdings to 12% of the 1,219,730 shares outstanding, and cut the Morse family-management holdings down to 27%. To get his own directors on the Fairbanks, Morse board, Silberstein said he hopes to get the support of "other substantial stockholders." However, if the Canadian Locomotive deal goes through, and the new shares line up on the Morse side as expected, the Morse family will have some 35%--working control--of its own company. But Silberstein hopes to block the deal, probably by a court suit.

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