Trans World Airlines Inc. said yesterday the company is "pleased" that Texas Air Corp. has raised its takeover offer and that it is studying certain requests made by Texas Air that would make it more difficult for financier Carl Icahn to acquire TWA.
Texas Air sweetened its takeover bid $3 a share last Friday to $26 a share, or a total in excess of $840 million. Texas Air's offer topped Icahn's $24 a share bid to acquire control of the company. Icahn has disclosed that he holds 45.5 percent of TWA, a situation that Texas Air is trying to overcome by encouraging TWA to dilute Icahn's stake.
TWA's board of directors met yesterday amid speculation that the company might resolve the battle for control. However, the directors made no final decisions at the meeting.
"The TWA board is mindful of Mr. Icahn's large stock position and the difficulty it poses in consummation of a merger with Texas Air," TWA said yesterday. "TWA is continuing to explore means of resolving this unsettled situation in the best interest of TWA's shareholders, employes and other constituencies it serves."
In a letter delivered yesterday to TWA's directors, Texas Air urged the company to enter into agreements that would block Icahn's takeover bid and enhance its own chances to win the takeover fight. Texas Air said Icahn's stake in the company could be reduced to 33 percent if Texas Air exercised its option to purchase 6.4 million shares and TWA took steps to issue an additional 6 million shares.
Texas Air said these steps would reduce Icahn's stake to approximately the same percentage that he held when TWA and Texas Air entered into a merger agreement earlier this year. That $23-a-share merger agreement was approved by the TWA directors, but it had little chance to win stockholder approval because Icahn said he would vote against the deal.
One analyst said TWA's board has not acted aggressively during the takeover fight, which makes it appear unlikely to take the dramatic steps outlined by Texas Air.
Texas Air also has suggested steps TWA could take to discourage Icahn from increasing his stake in the company if his ownership is reduced to 33 percent. Texas Air wants TWA to grant it the right to buy certain valuable TWA assets, a technique known as a "lock-up agreement with a crown jewel option," that would discourage Icahn from buying additional TWA shares.
In this case, the "crown jewels" Texas Air has asked TWA to give it the right to buy are TWA's valuable transatlantic routes, the facilities and equipment that go with those routes, and TWA's reservation system and related communications and data processing facilities.
Texas Air said it would be willing to relinquish its right to buy these crown jewels in the event that Icahn or another third party consummates a transaction at a price in excess of Texas Air's bid.
Texas Air also said it has discussed a plan with TWA's financial advisers that would involve the issuance to Texas Air of a special class of preferred stock that would "ensure consummation of the most desirable transaction for TWA shareholders." Texas Air said that such stock would not be used to block TWA stockholders from getting a higher price than the one it has proposed, should a better offer be made.
Icahn has won concessions from and the support of two TWA labor unions, which have said they oppose the acquisition of TWA by Texas Air. Texas Air yesterday criticized the labor agreements Icahn negotiated with the union leaders, saying certain provisions would cut the pay of TWA's non-contract personnel and could cause damaging resignations and further unionization.