The fate of the proposed merger of Continental and Western airlines was debated before the Civil Aeronautics Board yesterday as Texas International Airlines, a recent suitor for Continental, urged the board to let the marketplace decide the issue.
"If enough shareholders of Continental want to give Texas their shares in exchange for $13, you should allow the shareholders of Continental to make that decision," John W. Barnum argued for the Texas-based airline. "Even if you make a decision that a Continental-Western merger isn't a bad thing, let the shareholders decide. The only people who have said so far they want the merger is management."
Barnum was the lead-off witness at a hearing on TI's request for board approval of a voting trust that will allow a trustee to vote the shares offered TI against the proposed Continental-Western merger at the March 12 shareholders' meeting.As of Tuesday, about 4.3 million Continental shares had already been tendered to TI; it has offered to purchase up to 6 million shares, subject to board approval of the voting trust. If TI, which already holds 9.5 percent of the Continental stock, is tendered the full 6 million shares, it will have a total of 48.5 percent of the shares of the Los Angeles-based airline.
Lee M. Hydeman argued for Continental that board approval of TI's voting trust would doom the Continental-Western merger. "They have already biased Continental shareholders against the merger; they have changed the entire dynamics of the shareholders," he said. "They want to go to the stockholders' meeting with a stacked deck." What TI did was lawful but was "contrary to basic rules of fairness," Hydeman contended. TI should have come in with its bid sooner and not waited until Continental and Western had engaged in a six-month regulatory process, he said.
"We've heard a lot about fairness . . . but it's all fairness to Continental management," Barnum retorted later. "The board should be concerned with what is fair to the shareholders of Continental . . . and many of them have concluded that they have a better offer from TI."
The afternoon argument on the voting trust question followed a morning oral argument on the merits of the Continental-Western merger itself. Merger proponents included the Department of Transportation and the city and county of Denver. The staff of the CAB, the Department of Justice, the Attorney General's office of Colorado and several airlines argued that the merger would have anticompetitive effects.
The CAB has said it will attempt to decide both the merger and voting trust issues at an open meeting on Monday. Should the board give a go-ahead to both, and should TI succeed in stopping the Continental-Western merger, TI still needs to go through the CAB regulatory process in order to acquire Continental.