Continental Airlines and Western Airlines, two Los-Angeles-based airlines that have hoped to merge, found themselves in court again this week trying to fend off hostile takeover bids.
Western tried but failed to get U.S. District Court Judge Mariana R. Pfaelzer in Los Angeles to issue a temporary restraining order prohibiting further purchases of its stock by Air Florida Systems Inc., the parent company of the fast-growing Miami-based airline.
Continental went to federal court in Los Angeles, seeking to nullify a ruling of the California corporations commissioner requiring Continental to get a vote of its shareholders and employes before going forward with its plan to set up an employe stock ownership plan (ESOP) to thwart the takeover bid of Texas International Airlines.
After the judge's ruling in the Western case, the airline said it would continue with a discovery process in the hopes of getting an injunction barring Air Florida from buying more of its stock. Western has filed suits in the federal and Delaware state courts, alleging that the smaller but aggressive Florida firm was attempting to acquire a controlling block of Western shares without complying with state and federal laws.
The suit filed in Los Angeles charged that Air Florida was violating federal securities laws by making false and misleading statements in filings disclosing its purchases of Western stock.
Air Florida, which already has acquired more than 1.5 million shares, or almost 11.6 percent of Western's stock, filed an application with the Civil Aeronautics Baord this week, seeking board approval to acquire Western. Last week, it received CAB approval to buy, and place in a trust account, up to 50 percent of Western's stock while its takeover application is pending.
Western has complained that "serious and substantial" antitrust questions are raised by a potential Western-Air Florida combination, which is said included substantial additional debt burden and potential asset draining, adverse effects on current Western employes and services, and deterioration of cessation of important international services.
The hostile Air Florida-Western battle adds a new wrinkle to anm already complicated airline merger picture. Western's proposed merger with Continental was sidetracked when Texas International made its tender offer for Continental stock.
Continental's plan to avert a merger with TI by turning control of the airline over to its employes, through the issuance of new stock, appeared to run into a snag Continental hadn't expected when the California commissioner of corporations, Geraldine D.Green, ruled that the airline couldn't do so without a vote of shareholders and employes.
Texas International had agreed not to vote its Continental shares -- 48.5 percent of the total shares outstanding -- in a shareholder vote on the employe plan. In its suit this week, Continental contended that Green had exceeded her authority and that her decision conflicts with some federal and state laws. The airline hasn't said what it will do if the suit fails.
Meanwhile, the CAB has scheduled an oral argument next week on Texas International's application to acquire Continental and is expected to rule favorably on it by the end of August.