The Motor Omnibus World.
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Summary of the London General and the Vanguard Companies' Circulars.
The circular of the London General Omnibus Company, Limited, dated the 9th instant, and that of the Vanguard Motorbus Company, Limited, dated the toth instant, deal with some of the considerations which led up to the signing of a provisional agreement between the boards of the two companies, the signing of which agreement was announced by us a fortnight ago. We have not space at our disposal to do more than to summarise the covering letters.
The London General Circular.
The directors point out that increased competition has proved of little use to the public, and has inflicted serious hardship upon the shareholders, Notwithstanding the serious losses of 1907, the directors are, however, prepared, if necessary, to continue the contest with their rivals. They consider, none the less, that the proposed amalgamation, by way of purchase, after a valuation of the assets of each undertaking, is desirable, and believe that the disastrous competition, which has for so long embarrassed all omnibus companies, will then come to an end. After expressing their sense of obligation to Sir John Pound, Bart., for his services to the company, as chairman, for nearly 3o years, the directors explain that the Memorandum of Association will require considerable revision, it being already some so years old, and that it is proposed to convert the company's stock into ;Cr shares. We do not quote the motions for alterations in the articles, as they are of a formal character.
The Vanguard Circular.
The most interesting point in this is a brief statement of the company's income and expenditure for the nine months ended the 31st December last. The receipts from traffic and advertisements were ,::265,300. After deducting the total outlay upon repairs, renewals, and maintenance of the rolling stock, amounting together to upwards of £48,000, making what is considered a proper and sufficient reserve for its depreciation, and also debiting the whole of the working and administration expenses, there remains a profit for the nine months of 1:20,200, which is reduced by interest on the debenture stock to £1 1,200. The directors state that, having regard to the abnormal weather and exceptional competition, the above-mentioned results must be considered satisfactory, and in this we concur. We observe that no dividend is to be recommended, and that the directors regard it as urgently necessary that additional capital should be rendered available if the company is to maintain its position.
Passing to the matter of the negotiations with the L.G.O.C., the directors express their view that it is practically the only means to put an end to the expensive and disastrous competition of the past, and that they regard the scheme as eminently in the shareholders' interests. They add, rather significantly, that they confidently anticipate the likelihood of arrangements with other companies.
Synopsis of Agreement.
1. The sale takes effect as from the 25th March, 1908, and comprises the whole of the undertaking and assets of the Vanguard Company.
2. Tn satisfaction of all claims the debenture stockholders of the Vanguard are to receive five per cent. debentures of the London General of the nominal value of £160,000.
3. Such debentures, which will be part of an authorised issue (as at present) of £500,000 debentures, are to be secured by a mortgage of the leasehold properties transferred by the Vanguard, and a floating charge on the rest of the assets of the London General, ranking after (1) the existing £300,000 four per cent. first debentures, and (2) a proposed issue of £300,000 five per cent, second debentures of that company, by means of which the funds will be obtained to discharge the general indebtedness of the Vanguard and for further working capital. 4. In addition the London General undertake to pay and satisfy all the debts, obligations, and liabilities of the Vanguard (other than the debenture stock, which is to be satisfied as above mentioned), and will pay the costs of the winding up of the Vanguard if the latter enters into liquidation within the period mentioned in the agreement.
5. The London General will also issue to the Vanguard fullypaid shares equal in nominal amount to the surplus value of the
assets of the Vanguard as subsequently mentioned, such shares consisting proportionately of preference and ordinary shares of the London General.
6. All the assets of both companies are to be valued or ascertained as mentioned in the agreement, and from the total sum
thus arrived at in the case of each company there is to be deducted the amount of the debts and liabilities of such company, including debentures or debenture stock (the amount of the debenture stock of the Vanguard being taken for this purpose as £160,000) and certain costs which are to be apportioned between the two companies ; all valuations of assets are to bemade on the basis of a going concern. The result will be the surplus value of the assets of each company, which in the caseof the Vanguard Company regulates the amount of the purchase price (apart from the above-mentioned £160,000 debentures) to be received by it and payable to the shareholders. If the surplus value of the London General is less than the issued share-capital (both preference and ordinary) of that company,. its ordinary shares as at present issued are to he reduced by the necessary amount—on the other hand in the event of any excess, and should the assets of the London General include undivided profits, then the agreement provides for the distribution and capitalisation of the necessary amount of such undivided profits to make the present issued capital (preference and ordinary) of the London General equal to the surplus value. of its undertaking. 7. The board of the London General will consist of seven members, including two of the present directors of the Vanguard, viz.: Mr. Wheeler and Mr. Vv'alrond. Mr. Wheeler and Mr. Walrond will join the board of the London General as. soonas the agreement has been ratified by the shareholders of both companies. The obligations of the Vanguard to be taken over by the London General include £2,500 to be distributed by way of compensation amongst the retiring directors of theVanguard.
8. The agreement is conditional upon the necessary consents_ of the shareholders of both companies, and of the debenture stockholders of the Vanguard being obtained, as well as thesanction of the court to the requisite alteration of the memorandum of association of the London General, and also the reduction of the capital of that company if necessary. 9. The directors of the two companies are empowered to modify the agreement in non-essential details without the necessity of calling further meetings of shareholders, Mr. F. Gore Browne, KG., being the arbiter as to whether any proposed modification is of a non-essential character.
Meetings of the shareholders in the two companies are totake place to-day (Thursday), at 2.30 p.m., the L.G.O.C. meeting being convened for the great hall at Salisbury I-Touse, and that of the Vanguard for the Holborn Restaurant_ Vanguard Debenture Opposition.
Lord Armstrong and Sir Alfred J. Newton, as trustees. for the debenture holders, disapprove the terms of the pro-. visional agreement. They have issued a circular in which they call attention to the following objections :— " (I) You will only receive for each ..roo first deben ture stock now held by you in third debentures. "(2) You will receive interest instead of to which you are now entitled. "(s) Your third debentures will rank behind £300,000first debentures and ,300,000 second debentures.
" (4) In addition to the 4:16o,000 third debentures now offered to you, the general company can issue ..,'340,000. further debentures, ranking pari passu with your debentures at any discount they may please, without any re
ference to you. . . As you will no doubt have seen from the published accounts of the General Company to the end of June, 1907, a very serious loss was shown, and' we fear there is every reason to anticipate that the halfyear to 31st December last will show an even worse result, while, on the other hand, your chairman, in the letter which you have, we understand, received, states that theVanguard Company has earned more than the. interest payable on the debenture stock. "We are, therefore, strongly of opinion that the present proposals should not be accepted by you, and that you would be much better advised to rely on the security which you at present hold, unless the terms offered are consider-. ably modified in your favour."