TVA Deal

The ancient sport of bearbaiting consisted of setting dogs on a chained bruin. For the last five years Commonwealth & Southern Corp.'s President Wendell Willkie, who looks rather like an amiable grizzly, has been chained by the competition of Federal utility projects and baited by the TVA pack of David Lilienthal.

Bear Willkie lost his latest chance to get free last fortnight when the Supreme Court, without passing on TVA's constitutionality, rejected the attack of Commonwealth & Southern and other utility companies on TVA's competing with their established power lines (TIME, Feb. 6). This left the privately owned utilities the choice of selling out or competing eternally with the Government--the latter choice an obvious economic impossibility.

First proposal to sell out to TVA came from Willkie, early in 1934. All last year, he and TVA dickered sporadically over a fair price for Tennessee Electric Power Co., chief C. & S. subsidiary involved. The amount invested in Tennessee Electric Power's electric division was found by independent audit to be a net of $86,300,000. Mr. Lilienthal, mentioning depreciation, offered $55,000,000, presently raised his bid to $67,000,000.

This, plus Tennessee Electric Power's cash reserves, was just enough to take care of its $72,000,000 in senior securities, but left nothing for the common stock. Since C. & S. owns 99% of the common, Bear Willkie roared at the end of his chain. Last fall, baited anew by a Congressional committee investigating TVA, he countered by suggesting that SEC arbitrate the issue, offered to pay all appraisal expenses.

Last week, day after the Supreme Court decision on TVA, Franklin Roosevelt announced that SEC had informed him that it had no statutory authority to make such an appraisal. Next day, TVA's Chief Power Engineer Julius A. Krug, taking over during David Lilienthal's illness, went quietly to Wendell Willkie's green-carpeted office in Manhattan, ended the sport as far as Tennessee Electric is concerned.

His bid was upped to $78,600,000, speedily accepted by Wendell Willkie. Including cash and odds & ends, the deal netted C. & S. about $80,000,000, a figure it can increase by selling Tennessee Electric's water, ice and transportation properties, which TVA did not want. By & large the settlement was the best news the utility industry has had in years, gave the most genuine promise yet that utility baiting is nearly over.

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