Chesapeake & Ohio

The Van Sweringen brothers (Oris Paxton & Mantis James) last week presented a revised arrangement of their railroads to the Interstate Commerce Commission for approval. As in the case of the Nickel Plate System plans, disapproved last year by the I. C. C. (TIME, March 15, 1926), Henry W. Anderson and George S. Kemp of Richmond, Va., who represent Chesapeake & Ohio minority stockholders, are opposing the Van Sweringens now. Hearings may last a year--as they did in the Nickel Plate System case.

The Van Sweringen roads, which the two brothers control through stock ownership and cooperation of other stock owners sympathetic with their aims, are: Chesapeake & Ohio, Nickel Plate R. R. (nickname for New York, Chicago & St. Louis R. R.), Pere Marquette and Erie.

The C. & O. connects Chicago, Cincinnati and Louisville with Washington and James River ports (Newport News, Old Point Comfort, Norfolk). The territory furnishes farm products and coal for railroad transportation. Over the Hocking Valley, which it now owns, the C. & O. carries coal across industrial Ohio to Toledo, where the coal is transshipped for northern Great Lakes ports. Oris Paxton Van Sweringen is chairman of the C. & O. board of directors.

The Nickel Plate R. R. connects Chicago, Peoria and St. Louis with Toledo, Detroit, Cleveland and Buffalo--industrial territory. Mantis Jares Van Sweringen is chairman of this road's board of directors.

The Pere Marquette connects grain and iron ore ports on Lake Michigan's eastern shore with industrial Toledo, Detroit and, across the Ontario peninsula of Canada, mercantile Buffalo.

The Erie connects Chicago and Cincinnati with Cleveland, Buffalo and New York harbor--industrial and mercantile territory; some coal, some farm products.

The plan creating the Nickel Plate System to compete in the East with the Pennsylvania, New York Central and the Baltimore & Ohio was for the Nickel Plate R. R. to buy from the Van Sweringens and their associates control of the Erie, Pere Marquette and the C. & O. By controlling the Nickel Plate R. R., which became a sort of holding company, the Van Sweringens planned to control the whole system at relatively small cost to themselves. To reduce their investment further, they formed the Vaness Co. as a company to hold their controlling stock in the Nickel Plate R. R. They sold Vaness stock-- for cash, retaining enough stock certificates however, to keep control.

The revised arrangement is for the C. & O. to buy the Van Sweringens interests in the Erie and the Pere Marquette. These roads would be in the same relation to the C. & O. as the Hocking Valley already is, i. e., subsidiaries. The hearings begun last week seek I. C. C. approval of these specific purchases. No mergers will be mentioned if wise Van Sweringen lawyers, of which Newton Diehl Baker is the wisest, can divert the oueries of sharp-questioning Henry W. Anderson.

The quarrel that makes the hearings bitter arises from the fact that the Nickel Plate R. R. owns stock control of the C. & O., and the Van Sweringens and their Vaness Co. continue to own the Nickel Plate. C. & O. minority stockholders claim that their company is buying Van Sweringen property at prices set high by the Van Sweringens. They claim, too, that, if the I. C. C. permits the C. & O. to buy the Erie and the Pere Marquette (at Van Sweringen prices), later the Nickel Plate R. R. (i. e., Van Sweringens and Vaness Co.) may hornswoggle the C. & O.

Chesapeake Corp. Recently the Van Sweringens created the Chesapeake Corp. as a subsidiary of the Nickel Plate. In exchange for the 900,000 shares of the new corporation, the Nickel Plate gave it 600,000 shares of C. & O. stock. The 600,000 shares are slightly more than 50% of C. & O. stock. Therefore, the Chesapeake Corp. now controls the C. & O. The Nickel Plate can sell 449,999 shares of Chesapeake Corp. and still keep control of this corporation and, through it, of the C. & O.

Last week the Chesapeake Corp. pawned its 600,000 C. & O. shares (worth $105,000,000) for $48,000,000 by selling a collateral bond issue through J. P. Morgan & Co. These $48,000,000 give the Van Sweringens cash with which to pay off debts to bankers.

Virginian Railway. At the C. & O. hearing last week President William Johnson Harahan of the C. & O. mentioned that he was trying to buy control of the Virginian Railway for $80,000,000. This is the 545-mile road that Col. Henry H. Rogers of Standard Oil built to tap the soft coal deposits at Deepwater, W. Va. It runs parallel with the C. & O. to Hampton Roads, Va. Last year the Pennsylvania, through its subsidiary, the Norfolk & Western, sought to lease the Virginian for 999 years. But the I. C. C. said no. The C. & O. may have better arguments to present before the I. C. C.

Schematization. The following table schematizes the eventual, hoped-for relations of the various Van Sweringen properties:

Van Sweringens control Vaness Co.

Vaness Co. controls Nickel Plate.

Nickel Plate controls Chesapeake Corp.

Chesapeake Corp. controls C. & O.

C. & O. controls Erie.

C. & O. controls Pere Marquette.

C. & O. controls Hocking Valley.

C. & O. controls Virginian.