CHEMICAL & ENGINEERING
NEWS VOLUME
39,
NUMBER
22
The Chemical W o r l d This Week
MAY
29, i96i
Du Pont Told to Sell GM Stock Supreme Court decision may bring rapid end to 12-year antitrust battle between Du Pont and Justice Department Last week's Supreme Court decision in the Du Pont-General Motors stock case means that the 12-year legal battle between Du Pont and the Department of Justice could come to a rapid conclusion. And although the price of Du Pont and General Motors stock dropped sharply immediately afterward, the impact of the latest ruling may not be as severe as some fear.
Justice William J. Brennan Divestiture of voting rights no remedy The court's decision that Du Pont must dispose of its 63 million shares of General Motors stock within 10 years sets up the problem of how almost $3 billion in securities can change hands without disrupting the stock market and without causing a dollar loss to Du Pont stockholders. Market authorities agree that the 10-year time limit set by the high court will soften the blow to all involved. But even over a period of 10 years the stock market probably could not absorb the shares without a consider-
able drop in the market price of Du Pont and GM stock. For this reason, Du Pont is almost certain to want to distribute a large portion of the stock to its shareholders as dividends. Heavy Tax. In May 1958, the Commissioner of Internal Revenue ruled that a GM stock distribution would be treated as an ordinary dividend to Du Pont stockholders. Thus individual stockholders would be required to pay personal income tax on the distributed stock. Du Pont estimates that these taxes could well exceed $1 billion. In its last session, Congress considered legislation to give tax.relief on involuntary stock distributions required by antitrust proceedings. Bills introduced in both houses of Congress did not reach either floor. The Supreme Court decision could speed up Congressional action on the tax problem, observers believe. Crawford Greenewalt, president of Du Pont, says: "The Supreme Court's decision creates an urgent need for Congressional action to protect hundreds of thousands of innocent stockholders from serious and irreparable injury." Tax relief for Du Pont stockholders, however, is not the whole answer. There is the problem of how to handle the GM shares that would be allocable to some of the codefendants in the case —Christiana Securities Co. and Delaware Realty and Investment Co. A Department of Justice distribution plan filed in 1957 asked that shares going to these firms, about one third of the total, be sold by a trustee. Back to Chicago. Details of the stock-shedding must be worked out in the U.S. District Court in Chicago. Du Pont has 60 days in which to file a plan for complete divestiture of its GM stock, starting within 90 days and
finishing within 10 years. After the Du Pont plan is submitted, the Justice Department will have 30 days to present counter proposals. The Supreme Court decision, made by a vote of 4 to 3, reverses a district court ruling made by Judge Walter LaBuy (C&EN, Oct. 12, 1959, page 2 1 ) . Judge LaBuy decided that the tie between GM and Du Pont could
Justice Felix Frankfurter Government's case is unsubstantiated be broken if Du Pont were stripped of voting rights on its GM stock. The majority opinion, written by Justice William J. Brennan, said that a "pass through" of voting rights is not an effective remedy and that the Government is entitled to a decree directing complete divestiture. The dissenting view, presented by Justice Felix Frankfurter, called the Government's case an unsubstantiated assertion that any tie between Du Pont and GM gravely jeopardizes the play of competitive forces. MAY 2 9, 1961 C & E N
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