The Civil Aeronautics Board gave tentative approval yesterday to the bids of both Pan American World Airways and Texas International Airlines to acquire control of National Airlines.
The board's preliminary decision came in the largest and most complicated airline merger case it has been faced with since the Airline Deregulation Act was passed last year. $ however, the case was set in motion before that -- exactly a year ago yesterday when the small Texas International announced it had acquired a 9.2 percent share of National, an airline more than three times its size.
The scramble for control of National that announcement touched off soon included Pan Am and later Eastern Airlines, whose application to take over National is still pending before the board.
Yesterday's tentative action came when members of the CAB instructed their staff at a standing-room-only meeting to draw up a formal order finding that neither the Pan Am nor the Texas International takeover proposals would violate the antitrust laws by lessening competition in the domestic airline industry.
A majority of board members, however, balked at giving Pan Am the National Miami-London route and ordered the lucrative route open to other airlines if Pan Am is the successful suitor and a merger occurs.
A final board order approving the two acquisition bids will take between 30 and 60 days to prepare and is then subject to presidential approval, at least in the case of Pan Am. Board members still are grappling with Texas International's contention that their application is for acquisition of control of National only and not for transfer of international routes that requires presidential action.
In the meantime, the board took a related action which could shift the battleground for control of National to Wall Street and the capital markets. The board, effective immediately, lifted its order prohibiting Pan Am and Texas International from acquiring more than 25 percent each of National's stock; each of them had almost reached the 25 percent maximum. Whatever additional stock is acquired by the two suitors must continue to be replaced in nonvoting trusts, however, although the board said yesterday it would consider removing that limitation as well.
Trading in the stock of all the major players in the merger drama was suspended all day yesterday. National's stock closed Monday at 39 7/8, more than 20 points higher than it was when Texas International made its first purchase at an average price of $18.16 a share.
In May, at the urging of National top officials who had been opposed to a combination with Texas International from the beginning, National shareholders approved a merger agreement with Pan Am that also provided for a bidding war between Pan Am and Eastern if both carriers obtain government approval to acquire the Miami-based airline.
Yesterday, National said it welcomed the Cab's tentative decision to approve its Pan Am merger agreement but expressed disappointment that the board also approved Texas International's bid to acquire control It also said it was "seriously concerned" about the board's "onerous" condition to its merger approval barring the transfer of the Miami-London route to Pan Am.
Such a condition could jeopardize the future of National's Miami-to-London service and the integration of National's operations with Pan Am's as contemplated under the merger agreement, National said.
Texas International Chairman Frank Lorenzo, the only top airline of official to attend yesterday's board meeting, said afterwards the board's action gave Pan Am "an advantage" over his airline's attempt to acquire National. "I would have been more optismistic (about consummating control) if the board had turned down Pan Am," he said. He declined to say whether Texas International would seek more of National's stock.
Even if Pan Am wins out over Texas International, the Texas-based carrier stands to make a good deal of money; so far, its 2.1 million shares of National were purchased at an average price of $28.20, and Pan Am's merger agreement provides that its will pay $50 for each share of National stock. (A Texas International company statement said it was pleased that the CAB had decided to allow "the natural forces of the capital markets to begin working in the airline industry.")
Pan Am said yesterday the CAB recommendation to allow the flag carrier to acquire National's domestic routes -- its primary purpose in seeking National -- was "a significant step" in implementing air deregulation. But Pan Am said it was "deeply disappointed" by the Miami-London route recommendation.
In making its tentative decision, the board rejected the findings of Administrative Law Judge William H. Dapper, who had recommended that the board reject both bids on grounds they were anticompetive and would trigger a wave of additional mergers proposals that would further reduce the number of airlines available to the traveling public.
Board members yesterday spoke of the potential entrants into the markets Dapper was concerned with as well as the actual entrants to the routes since the record in the case was closed.