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The Deal. As intricate as Floyd Odlum's shrewd mind was the deal that he worked out. It offered an inducement for each company and for every class of stockholder of each. To Curtiss-Wright it meant getting rid of its troublesome "A" stock—by exchanging each share of "A" for ¼ share of a new 5% $50 cumulative preferred plus 1.8 shares of common, or (if "A" stockholders prefer) for ½ share of new preferred and 1/5 of a share of common. To "A" stockholders it meant an assured dividend and preferred position in liquidation (neither of which they had before), plus a higher conversion price, greater voting power. To holders of Atlas 6% preferred it meant a share for share exchange for Curtiss-Wright's new 5% preferred with a bonus of ¼ share of Curtiss-Wright common (which at the market —around $10.50 a share—takes care in advance of over five years' cut in dividend) plus a 60-day option to turn in each share of their preferred for four shares of common.
To Curtiss, which will have 700,000 to 1.000,000 shares of preferred, and a new load of $1,850,000-$2, 500,000 a year in preferred dividends, the deal will bring enough new cash and marketable securities from Atlas to give it about $1 in current assets (depending on the number of preferred shares) for each $1 of preferred.
If Curtiss has 1940 earnings of $15,000,000 they will protect the dividend six to eight times whereas Atlas' usual earnings barely covered it.
To Curtiss-Wright common stockholders the main advantages are the $37,000,000 of new capital from Atlas, the hope that this can be put to work to earn a return handsome enough for expansion plus dividends, and a straightened-out capital structure. To holders of Atlas' 3,000,000-odd shares of common (year-end net asset value: $12.80), it means trading $5 per share of their asset value for 65/100 share of Curtiss-Wright Common having a market value of over $6.75 ($10.50 a full share), and the remaining $7.80 per share of their asset value for one share of Odlum's special situations company. To Atlas' 1,951,073 perpetual option warrants (good to buy Atlas common if it ever rises from its present $9.50 to $25 a share), it offers a five-year warrant to buy a share of Curtiss-Wright common on a rising scale from $12.50 in the first year, to $14.50 in the fifth—a speculation on the aircraft industry.
To Odlum, Atlas' largest holder (roughly 200,000 shares of common, 200,000 warrants), a boom in Curtiss-Wright stock to these levels would be bonanza. To him also it means that his new $25,000,000 investment company will have only common stock, no preferred dividends to worry about in his speculative business. And it means that his clean capital structure may attract new speculative money, if he ever wants it. Even with its reduced capital Odlum's new Atlas, no longer an investment trust, now a new-fangled investment finance company, will tower over Wall Street's biggest investment banks, which are essentially distributors of, not investors in securities. From that pinnacle he can look for new worlds to conquer.