The Big Deal

"If I didn't keep my guard up all the time," Railroader Robert R. Young once said, "those goddammed bankers would scalp me in a minute." Last week, with a characteristic bit of footwork and his guard still high, scrappy little Bob Young pranced into the center of the ring looking like an investment banker himself.

By laying out a mere $1,750,000, Young's Alleghany Corp. bought control of Minneapolis' Investors Diversified Services, Inc., the giant catch-all which includes three big investment trusts having assets of $580 million.* It was the same kind of shoestring which Young had used to tie down Alleghany's $2 billion assets in 1937 for $4,000,000 cash.

Young bought control of I.D.S. from a group of associates headed by Bert C. Gamble, chairman of Minneapolis' Gamble-Skogmo retail chain (519 stores). Gamble had bought his own holdings in I.D.S. as a personal investment for less than $500,000 in 1945 and, in the resale to Young, made a tidy profit of more than $800,000 (less the 25% capital-gains tax). Even so, he thought Young had bought control "very cheap."

Open Field. If Young still wanted to exercise control of the New York Central --and he still talked as if he did--he had "the perfect vehicle," said Gamble. But it would take a financial maneuver complicated enough to give many Wall Streeters a headache.

Though Young's Chesapeake & Ohio railroad has owned 6% of Central stock for two years--in effect, a slim working control--the Interstate Commerce Commission has refused to let him exercise control, or sit on the Central's board, because it is illegal for the same man to control two competing railroads. Young might get around this by transferring C. & O.'s holdings in the Central to Alleghany Corp., putting Alleghany's C. & 0. voting power in trust to an outsider, and resigning his board chairmanship of the C. & O. Thus, unless the ICC found some legal barrier, Young would be out of the C. & O. and free to use I.D.S. to buy up to 10% of Central stock, thereby strengthening a controlling interest he could exercise.

Landing Net. Whatever else Young's purchase of I.D.S. might mean, it did illustrate how his Alleghany Corp. has been expanding into other fields and greener pastures. Since early 1948, Alleghany had sold more than $17 million of its railroad holdings, because Young was bearish on their earnings' future. Among the sales: Alleghany's entire common-stock interest in Seaboard Air Line Railroad and most of its holdings in Central of Georgia and Florida East Coast Railway Co. (all roads where Young could not get control). Alleghany also plans to sell its holdings of 225,000 shares of Rock Island common stock, and get out of that road.

With some of the cash it raised on these sales Alleghany has already bought into Portsmouth Steel and Interlake Steamship Co., a Great Lakes ore carrier, and increased its holdings of Pittston Co., one of the world's largest coal producers. Wall Streeters also gossiped that Young was casting a buying eye on Western Union and American Express Co., which he thought he could get cheap. Both would fit nicely into his transportation kingdom. For landing big fish like these, Bob Young was readying a big net.

*Among assets held by affiliates: 28,925 com mon shares of Montgomery Ward; 24,500 of Marshall Field; 54,000 of Greyhound Corp.; 20,000 of Commonwealth Edison; 25,000 of Consolidated Natural Gas; 30,000 of Standard Brands; 29,000 of Truax Traer Coal; 21,500 of Chesapeake & Ohio; oil holdings totaling $13 million, mortgages totaling $175 million.

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