Missouri Judge Issues Temporary Restraining Order : Icahn Can’t Buy More TWA Stock
A state judge Monday temporarily blocked New York investor Carl C. Icahn from buying more stock in Trans World Airlines, which Icahn has proposed to take over.
St. Louis County Circuit Judge Bernhardt Drumm issued a temporary restraining order that bars Icahn from buying additional TWA shares until June 17, when Drumm has scheduled another hearing on the case.
One of Icahn’s lawyers in New York, Dennis Block, said Drumm’s ruling would be immediately appealed.
Now Owns 31.6%
Icahn leads an investor group that already owns 31.6% of TWA’s common shares outstanding, and the group has offered $18 a share to buy the remaining stock.
TWA’s common stock closed unchanged at $19.125 a share Monday in New York Stock Exchange composite trading.
Drumm’s ruling came after TWA’s lawyers asked the judge to issue the order pending the outcome of TWA’s request to the U.S. Department of Transportation that the agency rule on Icahn’s fitness to run an airline. The department has yet to respond.
Drumm also refused to grant a request by Icahn’s attorneys to dismiss TWA’s lawsuit, which prompted Drumm’s ruling.
Earlier Monday, the state of Missouri joined TWA’s effort to curb Icahn’s advances.
Missouri’s secretary of state, Roy Blunt, filed a so-called petition of intervention with TWA’s suit asking that Icahn be forced to comply with a state law, enacted just last week, that is meant to curb the takeover of TWA.
The new law was designed to bring New York-based TWA under the provisions of an existing law dealing with hostile takeovers of Missouri concerns.
Needs Shareholder Backing
It requires Icahn to obtain the backing of two-thirds of the shareholders--rather than a simple majority--excluding his own holdings in order to complete the acquisition. And the law allows TWA’s shareholders or Missouri’s secretary of state to file a civil suit seeking an injunction to halt the takeover.
But Icahn asked a federal court in Kansas City to find the new law unconstitutional and to block it from being enforced.
At a hearing Monday on Icahn’s suit, Irwin Warren, a lawyer for Icahn, told U.S. District Judge D. Brook Bartlett that the new law was “drafted by TWA and passed in a single day” with “utter disregard” for existing federal interstate commerce regulations.
Gov. John Ashcroft signed the bill Thursday and said it provided TWA with the same protection against hostile takeovers that is provided to Missouri companies. Ashcroft said the airline’s heavy investment in Missouri, where it has 11,000 employees, has made it a state company in every way except formal registration.
TWA’s domestic hub, or connecting center, is St. Louis, where the airline operates about 200 flights daily. TWA also has engineering and maintenance facilities at Kansas City International Airport.
Warren argued that the Missouri law posed a “burden on interstate commerce in favor of local economic interests.”
“The Missouri law unquestionably violates federal commerce laws,” he said, adding that the law attempts to regulate the actions of stockholders nationwide and in a more stringent way than even federal commerce laws.
Warren also argued that Missouri lawmakers had overstepped their authority and that their sole intent in passing the law was to delay Icahn’s effort long enough for the airline to seek other bids or bolster its legal defense.
However, in a statement Monday, Blunt said Missouri is not “intruding into a free-market enterprise since this process is closely regulated by both state and federal governments.”
“The legislation is to further ensure more complete stockholder knowledge of the details of the proposed corporate acquisition,” Blunt said.
In addition to its Missouri suit, TWA asked a federal judge in New York to block Icahn from buying more of its stock, but the judge rejected that request last week.
