Corporate raider Carl C. Icahn and a group of companies that he controls said Thursday that they have acquired 20.5% of the stock of Trans World Airlines and are considering a merger or “business combination.” TWA immediately labeled Icahn’s presence both “uninvited and undesirable” and vowed to fight any takeover attempt.
In a filing with the Securities and Exchange Commission, the New York investor said he and the companies he heads “may explore the possibility of ACF Industries Inc. making a proposal for a merger or business combination” with TWA. Icahn is chairman of ACF.
In a statement, TWA President C. E. Meyer Jr. responded: “Because of his known objectives and tactics, his purchase of a large number of our shares and his threat . . . to seek control . . . are disruptive to our business and not in the best interests of TWA shareholders, employees or the traveling public or the communities we serve.”
Icahn’s filing with the SEC had been expected. It had been known for about 10 days that he was buying TWA stock, and the law requires a filing once his holdings reached 5%. However, observers had predicted that he would stop at 10%, with the goal of swapping his shares for some of the airline’s planes, then leasing them back to TWA or some other carrier. At the end of 1984, TWA had 159 planes, of which 90 were owned and the rest leased.
ACF Industries already owns a fleet of railroad freight cars that it leases to railroads and industries.
In its SEC filing, the Icahn group said it had conducted talks with TWA management and had received no encouragement to make a merger proposal. The group said its representatives may seek further discussions with TWA “with a view towards influencing the formulation and implementation of future policy.”
The group currently holds 6.7 million common shares of TWA, 5.1 million of which were bought from March 21 through Wednesday at prices between $12.625 and $16 per share. In composite trading Thursday on the New York Stock Exchange, the stock closed at $16.50, up 37.5 cents.
TWA’s Meyer said that Icahn had presented the airline with “ideas regarding the future of TWA. We explained to him that these are not sound or responsible courses of action for the company, and Mr. Icahn now admits that some of his principal suggestions are not feasible.” TWA declined to say what the suggestions were.
One airline industry analyst, who asked not to be identified, said a takeover attempt by Icahn would not be easy. For one thing, he said, the airline industry is still very much tied up in a variety of regulatory requirements. “Mr. Icahn will find it is much more difficult to use his traditional format in this business than it is in acquiring the normal manufacturing company.”
The analyst also said that TWA, like many airlines, had a book value in excess of its market value. “There are an awful lot of uninformed people who believe, therefore, that the company is worth more dead than alive. . . . But when you look at the assets of TWA, they are principally aircraft, and I would quite seriously question the capability to dispose of such a large number of aircraft and achieve anything approaching market value.”