New York investor Carl C. Icahn declared victory today in the fight for control of Trans World Airlines Inc. and said he hopes to complete the acquisition by Nov. 30.
Icahn, who already owns 45.4 percent of TWA, confidently made the statement after TWA's board of directors announced that it is satisfied with Icahn's $24-a-share takeover offer and would not take steps to support Texas Air Corp. in the takeover fight.
Texas Air, the parent of New York Air and Continental Airlines, had asked TWA to grant it options to buy the company's most valuable assets as part of a plan to defeat Icahn. The TWA board's refusal to grant the options and superior voting rights to Texas Air means the directors, who earlier this year agreed to sell the company to Texas Air to avoid being acquired by Icahn, have decided to allow Icahn to proceed with his takeover bid.
TWA offered several reasons why it no longer favors Texas Air's proposal. The company said that the opposition of many of its employes and unions to working for Texas Air could be disruptive. It said Icahn not only has won union support but also has negotiated significant wage concessions that will lower the airline's operating costs. The company also said Icahn's $24-a-share offer was better than his earlier proposal and that he would be able to complete the acquisition more quickly than Texas Air.
Texas Air has offered $26 a share in cash and preferred stock for TWA, while Icahn has offered a similar combination of cash and securities worth $24 a share. TWA said that, if Texas Air wants to put its merger proposal to a vote of TWA shareholders, it will cooperate. However, it is highly unlikely that Texas Air could win shareholder approval, because Icahn controls enough shares to block the proposal. If Texas Air insists on a vote, it is likely that its proposal would be defeated and Icahn then would submit his proposal to a vote of shareholders this fall.
"The fat lady's getting ready to sing," Icahn said in a telephone interview today. "I think my proposal to take over the airline will hopefully go through on schedule by Nov. 30, subject to financing. I'm pretty happy with the way things went today.
"It is a source of great satisfaction that all interested parties will emerge in a strong position: the employes, whose sacrifices in reduced pay and benefits will be rewarded by profit sharing and ownership interest; the shareholders, whose stock has tripled in value in less than one year; the traveling public, whose right to uninterrupted transportation is assured; and the communities that will continue to benefit from TWA's stable presence," Icahn said.
In a brief statement issued following TWA's board meeting, Texas Air said, "We are obviously disappointed, but the board gave very fair consideration to our proposal."
It is unclear what Texas Air's next move will be. Wall Street sources said the company and its financial adviser, Drexel Burnham Lambert Inc., could make about a $45 million profit if they withdraw their takeover offer and sell their TWA shares. That $45 million consists of $18 million in fees from TWA for dropping the bid and about $25 million in profit from the sale of TWA stock Texas Air already owns and the exercise of options it holds to purchase additional TWA shares.
Wall Street sources said Texas Air was close to agreeing to drop its bid in return for a payment last week, but wanted more than $45 million. Icahn and TWA would not agree last week to higher payments for Texas Air, sources said.
Although Icahn's financing for the deal is not complete, he apparently is so confident that he can complete the deal by Nov. 30 that he has agreed to increase the value of his offer by 25 cents a share for every month longer that it takes.