Eastern Airlines President Frank Borman charged yesterday that National Airlines directors were trying to establish a "rigged bidding procedure" that favors Pan American World Airways' bid for control of National at Eastern's expense.
The procedure being contemplated would deprive National's stockholders of the opportunity to accept the highest offer, Borman warned, leaving National's directors open to class action suits from its shareholders.
In a press conference in Washington, Borman said Eastern would consider withdrawing its $50-a-share offer -- which best Pan Am's by $9 a share -- if National "persists in this manner.
"It would be futile for us to continue in a no-win situation," he said.
According to Borman, an amendment being considered to the National-Pan Am merger agreement would establish a 72-hour bidding procedure in the event that the government approves both Eastern's and Pan Am's merger applications. The proposal would permit Pan Am to match the present Eastern offer; then Eastern would have have one opportunity to improve its offer. Then Pan Am gets the last bid: if Pan Am matched the improved Eastern offer, National would be required to accept it and all bidding would cease.
"This type of management agreement is in danger of depriving National stockholders of the utmost value for their stock," Borman complained. "It makes you wonder whether Pan Am is not already in de facto control of National."
Borman complained about the proposed procedures in a letter to L. B. Maytag, National's chairman and chief executive officer, warning him that Eastern would consider legal action to assure that its offer was considered by National's shareholders "on an equal basis" with Pan Am's offer.
In response yesterday, National asserted that Borman's charges were "misleading" and said its shockholders would be told they could approve both proposals. Including Eastern's offer in the same proxy statement as Pan Am's would put Eastern's proposal on an equal footing for obtaining National stockholder approval, National said. [Eastern's offer mirrors the Pan Am plan except for the money offer.]
But it defended the proposed procedures. "Eastern's merger proposal came after Pan American's National said. "Pan American's right to match someone else's offer is fair and equitable," National said.
William H. Waltrip, Pan Am's executive vice president, yesterday accused Borman of "again acting as a spolier" and charged that Eastern's merger offer stemmed from a "fear of competition from Pan Am on its routes." He said the amended contract could permit Pan Am to pay as much as Eastern for National's stock "in the unlikely event" that Eastern's offer is also approved by the government.
Pan Am has a contractual right to have National stockholders vote on the merger agreement in its original form but is willing to enter in the amendment to take into account the Eastern offer, Waltrip said.
Borman yesterday said that National has asked Eastern to agree to pay Pan Am $500,000 in the event that Eastern wins control of National and National has to break its contract with Pan Am.
Texas International Airlines is also attempting to take over National but has been rebuffed by National directors and its bid is considered a hostile takeover attempt.
Both TXI and Pan Am each have acquired almost 25 percent of National's stock, which is being held in separate trusts intended to keep the airlines from exercising any control over National.
Yesterday, Borman said Eastern had 100 shares of National's stock "so we can find out what's going on."
Although some antitrust attorneys have raised questions about an Eastern-National combination, Borman contends the new environment created by airline deregulation should make a difference.