Corporate raider Carl C. Icahn said Tuesday that he has offered to the board of directors of Trans World Airlines what he termed a "cash merger transaction" in which he would pay $18 per share for the 75% of the carrier's shares that he and his investment group do not already own.
The deal would be worth about $600 million, he said.
Icahn also threatened in his letter to the TWA board that, if it does not permit a shareholder vote on his proposal, he would seek to oust the present directors and replace them with a board that would be committed to permitting such a vote.
In response, TWA President and Chief Executive C. E. Meyer Jr. issued a statement saying that Icahn's "unsolicited cash merger proposal will be given due consideration by TWA's board of directors." But he added that "our stockholders should be aware that Icahn simultaneously is trying to remove all incumbent TWA board members and replace them with a handpicked board committed to his proposal. We intend to resist this pressure tactic."
Already Holds About 25%
Icahn has been buying stock of the airline for several months and had said Friday that his investment group already holds about 25% of TWA stock. He has spent about $142 million so far on TWA shares.
TWA management has been fighting his overtures in the courts and before the Department of Transportation. It has said that Icahn does not plan to operate the airline but to liquidate it. It has also argued to the Department of Transportation that he is not fit to run an airline.
But Icahn said in a telephone interview late Tuesday that "we believe in the long-term viability of the airline, and we plan to run it as an airline. We believe that TWA should allow its shareholders to decide if they wish to sell their company. We'll vote with the majority."
Icahn also said in his written proposal that ACF Industries, a leasing company that he controls, and other companies affiliated with him would contribute about $400 million in cash of the nearly $600 million needed for the merger. He added that he was confident that the remaining $200 million could be obtained.
However, he said that, if he did not get a commitment for this funding by the time that the proxy material for the cash merger is mailed out to shareholders, he would be willing to give the airline a "two-year standstill"--a promise not to acquire more TWA shares for that period.
Icahn offered not to vote his shares for the cash merger unless a majority of the other stockholders vote in favor of it.
One airline industry analyst said $18 per share did not seem to be enough. He said the stock, excluding the value of the airline's lucrative international routes, was worth between $20 and $22. While he said the price might be subject to negotiation, he predicted that the TWA board would reject the $18 price.
Icahn noted in his letter that TWA's average share price has been $10.375 since TWA was spun off by Transworld Corp. early last year. It closed Tuesday at $17, unchanged from Monday, in trading on the New York Stock Exchange. But Icahn has indicated that he believes that the price would fall if he were no longer in the picture.