The Civil Aeronautics Board yesterday put the proposed merger of Continental and Western Airlines in serious jeopardy.
In twin actions, the CAB approved the proposed Continental-Western combination, but at the same time paved the way for Texas International Airlines to try and acquire Continental itself.
The board decision also opens the way for a renewed effort by UNC Resources to try and acquire Western. The Falls Church company, engaged primarily in uranium mining and milling, indicated interest in acquiring Western late last year.
The board specifically approved the Texas airline's request for permission to buy up to 48 1/2 percent of Continental's stock and to vote the shares against the Continental Western merger at the airline's March 12 shareholder's meeting.
Unless there is a successful legal challenge to the board's action -- something Continental said yesterday it will pursue -- the board decision probably kills the Continental-Western merger.
TI which already owns 9 1/2 percent of Continental's stock, had offered to purchase up to 6 million shares for $13 each. The offer is subject to board approval of a voting trust that will allow a trustee to vote the shares offered TI against the Continental-Western merger next week. By last Tuesday, about 4.3 million Continental shares had already been tendered to TI. Under Securities and Exchange Commission rules, TI can begin buying the shares tendered to it on Saturday.
Should TI succeed in stopping the Continental-Western merger it still needs to go through the CAB regulatory process in order to acquire Continental.
At yesterday's meeting, board members were unanimous in taking a "hands off" approach toward TI's tender offer. "I don't think we should be in the business of trying to thwart hostile takeovers," CAB member George A. Dalley said at one point.
Although CAB Chairman Marvin S. Cohen said there was "something not terribly genteel" about TI's last-minute bid for Continental, he said the board's role was "a very limited one." The board has to look at whether TI's stock purchase strategy has anticompetitive effects, he said, adding "I just don't think it does."
When someone asked whether the board should consider allowing TI to acquire and vote less than 48 1/2 percent of Continental's stock, CAB member Gloria Schaffer said, "If we did, we would be substituting our business judgment for theirs."
Although approval of the voting trust would allow TI to hold 48 1/2 percent of Continental's stock while the board considers TI's acquisition proposal, CAB General Counsel David Kirstein said the staff was convinced TI would not be in a position to influence the day-to-day operations of Continental.
The board took up the issue of the voting trust immediately after it approved, by the same 5-to-0 vote, the proposed merger between Continental and Western. Although the board had rejected the same merger less than two years ago, board members yesterday indicated a belief that circumstances in the industry had changed.