Eastern Airlines yesterday criticized an auction procedure agreed to by National Airlines and Pan American World Airways to determine whether Eastern or Pan Am will successfully acquire National should both win federal approval for their merger plans.
In a "Dear Bud" letter to National Chairman L. B. Maytag, Eastern Chairman Frank Borman labeled the plan "unfair" to both Eastern and National's shareholders and said Eastern is amending its offer to acquire National. Under its new merger terms, Borman said, National's shareholders would be in a position to receive at least $50 a share -- provided Pan Am is willing to match Eastern's offer -- regardless of whether Eastern or Pan Am alone receives federal approval.
Under current plans, the shareholders would receive $50 a share only if Eastern's acquisition is approved by the government.
Pan Am, which signed a merger agreement with National before Eastern jumped into the bidding, has agreed to pay shareholders $41 a share.
Under the auction procedure announced by National last week, there would be a series of five bids with Pan Am getting the last bid in each case. If Pan Am matched Eastern's price in each round, Pan Am would get to acquire National.
Borman asked that its merger offer be presented for National shareholder approval at the same time as Pan Am's.
In response, Maytag yesterday said he regretted that Eastern wasn't agreeable to the bidding arrangements National entered into under its contract with Pan Am. "National believes that such arrangements would give Eastern ample opportunity to achieve its merger objectives while also permitting National to fulfill its contractual agreement with Pan Am," he said.
National expects to clear proxy material with the Securities and Exchange Commission shortly, the airline said.