and Rule U-62 are necessary with respect thereto. By condition in our order, NEES will be required to send a copy of these Findings and Opinion and Order to the public stockholders of each of the constituent subsidiaries. We have considered the other applicable provisions of the Act so far as they relate to transactions not specifically discussed herein and we find that the applicable provisions of the Act and the Rules promulgated thereunder are satisfied. Accounting Treatment OTHER MATTERS NEES proposes, at the time of the merger, to transfer its investment in shares of the merging companies into its investment in Essex. NEES also proposes to record the increase in the underlying net assets applicable to its investment in common shares of subsidiaries arising from the merger, which increase as at December 31, 1956, amounted to $316,570, by a charge to its general reserve relating to investments in common shares of subsidiaries and by a concurrent credit to Account No. 171-Other Deferred Credits. The amount so credited is to be available for contra adjustments resulting from any future increases in the excess of cost of investments in common shares of subsidiaries over the related underlying net assets. Any shares of Merrimack acquired by NEES as a result of its purchase of fractional scrip will be recorded at the cash cost thereof. NEES requests approval of the proposed accounting treatment under Instruction SC of The Uniform System of Accounts for Public Utility Holding Companies.10 The pro forma balance sheet of Merrimack, as set forth in Appendix A, carries forward the balances in the various asset and liability accounts of the constituent companies, including their respective earned surpluses, except for intercompany eliminations and except further that the capital stock of Merrimack, which will be stated at the same par value of $10 per share as attaches to the present stock of Essex, will be stated at an amount which is $426,655 less than the sum of the par values of the stocks of the constituent companies. This difference will be credited by Merrimack to an account entitled "Premium on Capital Stock." 10 Instruction 8C provides as follows: "In the case of securities or other assets acquired by the accounting company as a result of the merger, consolidation, liquidation, or dissolution of an associate company in which the accounting company has an interest, the amount entered upon the books of the accounting company in respect of the securities or other assets thus acquired shall be such as the Commission may approve or direct." The accounting treatment proposed by NEES is identical with that which we required in our approval of its proposed acquisition, pursuant to a voluntary exchange offer, of the stock of Lynn Gas and Electric Company," and we find that it is appropriate and in accord with sound accounting principles. We similarly find that the proposed accounting treatment on the books of Merrimack is in accord with sound accounting principles. Accordingly, the proposed accounting treatment in connection with the transactions is approved. Fees and Expenses The total estimated fees and expenses of $41,410 in connection with the proposals, other than the solicitation of proxies, consisting of $16,000 for cost of services to be rendered by New England Power Service Company, an affiliated service company, $23,810 for taxes and recording fees, and $1,600 for printing and miscellaneous expenses, do not appear unreasonable. The estimated expenses to be incurred in soliciting proxies from the minority stockholders of Lowell amount to $3,200 and include $1,500 for services to be rendered by New England Power Service Company. These expenses likewise do not appear unreasonable. An appropriate order will issue. By the Commission (Chairman Armstrong, Commissioners Orrick, Patterson, and Sargent), Commissioner Hastings being absent and not participating. "New England Electric System, 37 S. E. C. 744 (1957), p. 761. 37 S. E. C. 37 S. E. C. APPENDIX A MERRIMACK-ESSEX ELECTRIC COMPANY Condensed Pro Forma Balance Sheet as at December 31, 1956 Property, plant and equipment.. Construction work in progress. Other investments.. Cash in banks. Accounts receivable, less reserves. Materials and supplies.. Prepaid accounts. Deferred charges... Unamortized expenses (less premiums) on bonds. First mortgage bonds. Debenture bond.... Notes payable to banks.. Notes payable to parent. Accounts payable. Accrued liabilities. • Showing the estimated effects of the proposed acquisition of 23 KV lines and equipment from New England Power Company and exchange of shares in connection with the proposed merger. Condensed Pro Forma Income Statement For the Year Ended December 31, 1956 Comprises $31,000 net effect of the acquisition of 23 KV lines and equipment from New England Power Company and reduction in purchased electricity costs resulting from diversity of demands, and $60,500 Federal income tax savings because of the inclusion of the resultant company in consolidated Federal income tax returns. () Indicates red figure. |