Banana Split

In June 1870, a Boston schooner skipper named Lorenzo Baker stopped at Port Morant, Jamaica, for a cargo of bamboo and some rum punch. While refreshing himself he bought--apparently with some misgiving--a load of bananas at 25-c- a bunch. The bananas were a bonanza; in the U.S. they brought $2.50 a bunch, and Captain Baker quickly went into the banana hauling business. Since then his company has grown into United Fruit Co., the world's largest banana producer and carrier (1957 sales: $342.3 million), which currently accounts for 60% of the U.S. market. United grew so large that in 1954 the Government filed an antitrust suit against it, charging that the company controlled the banana lands of Central America and monopolized the banana trade. Last week, on the eve of a trial in New Orleans Federal District Court, United agreed to a consent decree under which it will create a new competitor.

United will provide the competitor with assets and properties to support imports of about 9,000,000 stems a year, about 35% of United's imports in 1957. Managerial personnel must also come from United. The decree restricts United from acting as a processor or jobber with in the U.S., and orders it to get rid of its holdings in International Railways of Central America, which owns the main railroad in Guatemala and El Salvador.

Three Choices. United, which has until mid-1966 to submit a plan to the New Orleans Federal District Court and another four years to comply, has three choices. It can: 1) create a subsidiary, transfer assets to it, then distribute the stock to United stockholders; or 2) sell a partial interest in the subsidiary to a buyer willing to invest at least $1,000,000 and distribute the rest of the subsidiary to United stockholders; or 3) sell outright enough assets for a purchaser to import the required 9,000,000 stems a year. United may not hold an interest in the purchaser, nor may Standard Fruit & Steamship, its major rival, which now has 18% of the U.S. market.

The Justice Department sees no danger of interlocking control in a stock distribution to United stockholders. Officers of United hold less than .005% of the outstanding common, and 80% of the stockholders own less than 100 shares.

Problem Settled. Settlement of the suit solves one of the major problems of Indiana-born Kenneth H. Redmond, 62, who succeeded colorful, scrappy old Samuel Zemurray as United Fruit's president in 1951. To Redmond the decree is a green light for plans on the shelf since 1954. Last year United Fruit leased a million-acre concession from the Panamanian government to drill for oil; it hopes now to look over other mineral resources in Central America. After the announcement last week, investors sent United Fruit from 39 5/8 to 43 on the New York Stock Exchange. They noticed, as President Redmond points out, that no provision of the decree materially affects United Fruit's foreign operations, and "there are no provisions which deny the company opportunity for continued growth and development."

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