Underwriter's Complaint

Three weeks ago Bror G. Dahlberg, president of Celotex Corp., cooked up a plan with his clever friend, famed Investment Truster Wallace Groves, chairman of Phoenix Securities Corp., whereby Celotex would take over from Phoenix the working control of Certainteed Products Corp. Celotex, a $10,000,000 concern which manufactures insulating materials chiefly from a base of sugar cane fibre, could broaden its line of building materials with Certairi-teed's products, which include asphalt roofing and gypsum plaster.

Last week this apparently routine and timely deal nevertheless drew a loud complaint from Distributors Group Inc., underwriters of $4,000,000 worth of Celotex debentures. Reasons for the complaint were stated in a letter sent to Bror Dahlberg by Vice President Herbert R. Anderson of Distributors and to the security dealers who participated in the Celotex financing. Reader Dahlberg. hurrying through congratulatory remarks on the management and "excellent objectives'' of Celotex, soon was reminded of a fact he knew well, that Phoenix already has working control of Celotex as well as of Certainteed. But in the plan to sell Certainteed to Celotex Mr. Anderson failed to "see that there is any effective change in control of the two companies." Therefore, Mr. Anderson went on politely, there seemed "no justification" for Mr. Dahlberg to pay Mr. Groves $60 a share for 9,496 shares of Certainteed prior preference stock selling on the Stock Exchange at $26.50, and also exchange 43,744 shares of Celotex common for 109,360 shares of Certainteed common when market prices of the two stocks indicated no such ratio. Mr. Dahlberg was actually handing Mr. Groves a premium of about $500,000. Holding such a premium excessive under present business conditions, Mr. Anderson closed by requesting President Dahlberg to scrap the deal.

Bror Dahlberg retorted: "Maybe the time has come for some business man to say that a given day's stock market quotation does not necessarily represent the real value of an issue." Uncharitable observers remarked that a time might come next summer when Mr. Groves's Phoenix could use $500,000 to help meet maturing notes.

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