End of the September Song

In a year of mammoth mergers, one of the main events came last September when Rochester's Xerox Corp. and Manhattan-based C.I.T. Financial Corp. announced plans for a union. The deal would have involved a swap of Xerox stock then worth $1.5 billion and created a hefty new conglomerate with assets of $4.5 billion. The agreement was based only on a handshake, but Xerox President C. Peter McColough cheerfully predicted that the merger would provide his company with "a much broader base than we now enjoy, enabling us to accelerate our plans in several fields."

Last week the merger prospects vanished as suddenly as they had appeared. In a joint statement that was every bit as unexpected as their September song, McColough and C.I.T. Chairman L. Walter Lundell announced a "mutual agreement" to drop the matter. They offered no reason for the dropout. The two companies did, however, have some explaining to do--if only to their own people. One nonplussed C.I.T. director complained to newsmen that he had been taken by surprise both in September and by last week's announcement. The idea had been broached and the two companies had launched studies of each other, he said, and "that's all I know."

In point of fact, negotiations never did get far enough along for formal plans to be presented to the companies' boards of directors, much less to stockholders, who would have to vote final approval. With a wary eye out for the Securities and Exchange Commission, which is campaigning for ever earlier disclosure of corporate news, the top men of the two companies originally announced their discussions only seven days after they had first met over the embryonic plan.

A Bit Rich. Whatever caused last week's retreat, the merger had drawn one strong and perhaps decisive negative vote from Wall Street. On the basis of tentative financial terms announced by the two companies in September, Xerox was setting the value of C.I.T. at something like $70 a share--a bit rich, in the view of many securities analysts, for a stock that had been trading at around $45 a share.

By last week Xerox's stock had fallen a drastic 18 1/4 points since the September announcement, costing the company's investors a paper loss of $400 million and reflecting a widespread notion that a link with solid but unspectacular C.I.T. could only tarnish Xerox as a glittering growth stock. At any rate, there were palpable signs of stockholder relief when the deal was finally dropped. In the first day of trading on the New York Stock Exchange after the announcement, Xerox was bid up 6 1/2 points to $277.25 a share.

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