More Green in Other Pastures

STOCKS More Green in Other Pastures

By its very nature, a holding company works behind the scenes, hates to make headlines. Yet one of the U.S.'s biggest holding companies, the Alleghany Corp., is constantly creating spectacular business news. A 1954 proxy fight in which Alleghany's progenitors, the late Robert Young and aging Woolworth Heir Allan P. Kirby, now 73, took control of the New York Central Railroad was big and bitter. Next, in one of Wall Street's most famous proxy battles, Kirby lost Alleghany to Texans Clint and John Murchison (TIME cover, June 16, 1961), later won it back again by stubbornly outsitting and outbuying them.

Last week Alleghany was in the news again. In a 126-page offer that the Wall Street Journal despairingly described as "probably one of the more complicated documents in corporate history," Alleghany proposed to trade 984,100 Central shares that it holds for 5,000,000 outstanding Alleghany shares, which would be subsequently retired.

At first glance, it seemed strange that Kirby and Alleghany President Charles T. Ireland Jr., 44, were ready to trade out of a railroad for whose control they had fought so recently and so desperately. One key to the offer is the upcoming merger of the Central with the Pennsylvania Railroad into a powerful new Penn Central. Alleghany currently holds 14.3% of Central stock; in the Penn Central, however, that share would be diluted to 5.8%. Wrote Ireland in the tender offer: "Alleghany questions the advisability of maintaining almost one-third of its portfolio investments in the stock of a corporation it would not control." Solution: swap Central shares for Alleghany, thereby saving $11.8 million in capital-gains taxes that Alleghany, because its original Central holdings have tripled in value, would have to pay in an outright stock sale.

The swap proposal, however, has even broader ramifications than the Penn-Central merger. Alleghany long concentrated on railroad stocks, once owned substantial holdings in the Chesapeake & Ohio and Baltimore & Ohio, still has $27 million worth of Missouri Pacific Railroad stock. Now there is more green in other pastures. Alleghany's biggest single holding, worth $2.6 billion, is Investors Diversified Services, a management firm that oversees five investment companies, including the world's biggest mutual fund. Alleghany has also invested in real estate and life insurance companies. What Kirby and Ireland want to do is to free Alleghany from its railroad ties and put its money to more use in these other areas.

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