Resorts International, the casino-hotel company that tried to acquire Pan American World Airways more than 15 years ago, has made an offer to buy Trans World Airlines, a source close to the airline said Friday.
"It's not a done deal," the source said. "There was a serious expression of interest on the part of both TWA and Resorts. . . . Many things have to be ironed out, such as the price structure of the potential transaction."
The offer is believed to be "somewhere in the low $20s and possibly as high as $23 per share," the source said, but the price would vary depending on whether the deal would be for cash alone or cash and securities.
TWA's board met in a special session to consider the offer, he said. The board heard a report and then told its financial adviser, Salomon Bros., to continue assessing the airline's options. TWA and Resorts spokesmen declined to comment.
TWA has been trying to rid itself of New York financier Carl C. Icahn, who has been buying up its stock since last summer and currently controls 32.77% of TWA's common shares.
Icahn has said that he would oust TWA's president, C. E. Meyer Jr., if he gains control but has vowed that he would continue to operate the carrier.
Offered to Buy Rest of TWA
TWA has charged, however, that Icahn wants to dismantle TWA and sell its parts. It has fought him in federal and Missouri courts and has asked the Department of Transportation to consider if an Icahn-owned TWA would be fit to carry passengers.
Icahn recently offered to buy the remainder of TWA for $18 a share, but TWA's board declared the offer inadequate and brought in Salomon Bros. to help find a buyer willing to pay more. TWA shares closed at $19.50 on Friday, up 50 cents. Resorts' stock fell 62.5 cents to $43.625.
If Resorts does buy TWA, it would represent a windfall for Icahn, who began buying his shares last summer but has greatly stepped up his purchases in recent weeks.
"Icahn would be just delighted," said Louis Marckesano, an airline industry analyst with Janney Montgomery Scott in Philadelphia. "He could get out of this unfriendly situation and take his marbles and go somewhere else.'
Icahn has paid an average price of $16 a share for his 11.23 million shares of TWA. Thus, a buy-out by Resorts at $21 per share would give him a profit of about $56 million.
Harold Vogel, entertainment analyst with Merrill Lynch, Pierce, Fenner & Smith, said Resorts, which opened the first Atlantic City casino in 1978, "has been looking for a way to grow out of its gaming operations to diversify. Atlantic City has not been growing all that much, and they have virtually all of their eggs in one basket."
Could Easily Afford Airline
According to Marvin B. Roffman, who follows Resorts for Janney Montgomery, Resorts could easily afford TWA. Since it opened its casino in Atlantic City, it has recorded a cash flow (pretax profits plus depreciation) of $549 million on a total investment of $155 million, he said.
"This tremendous cash machine has made it possible for Resorts to become the largest owner of real estate in Atlantic City," Roffman said, and the choicest parcels, especially those along the Boardwalk, can be very profitably leased.
"For example, two years ago it signed a 99-year lease to rent for $6 million a year one parcel which it had purchased for only $1.2 million," he said. Resorts is currently building a second casino-hotel in Atlantic City that will have 125,000 square feet of gambling room, making it the largest casino in the world.
Resorts had 1984 gross revenue of $483.9 million, with slightly more than $300 million of that coming from the gambling revenue of its casinos in Atlantic City and Nassau, the Bahamas. Earnings last year dropped sharply to $5.2 million from $40.1 million. The decline was largely due to bad securities and metals investments, a company spokesman said.
Resorts tried to acquire Pan Am in 1969. It first bought about 2 million shares, or about 5%, from Gulf & Western, then acquired another 1.5 million shares from Chase Manhattan Bank.
Congress thwarted the deal, but Resorts still holds a stake in Pan Am.