TWA Request for Probe of Icahn Denied : Transportation Dept. Deals Setback to Takeover Challenge
In yet another setback for Trans World Airlines, the Department of Transportation on Monday turned down a request by the carrier to examine the fitness of financier Carl C. Icahn to operate an airline.
In denying the airline’s application to “determine the continuing fitness of TWA to operate should Carl C. Icahn acquire control of TWA,” the agency said it did not want “to be drawn into takeover attempts or other management disputes as a matter of course or to otherwise substitute unnecessary government regulation for the competitive pressures of the marketplace.”
“I am gratified and I feel vindicated by DOT’s decision,” Icahn said in a telephone interview after the decision was announced.
Icahn and an investor group led by him have been buying TWA stock for several months and currently own more than 32.77% of the airline. TWA has sued him both in federal court and Missouri state court in St. Louis, where much of its operations are located. A federal judge already has declined to intervene, and litigation in Missouri is still pending.
TWA has said that, if Icahn acquires it, he plans to sell off its planes and international routes to the highest bidders. In court testimony and in an appearance last week before a House committee, the entrepreneur has vehemently denied that.
The DOT action does not come as a surprise to observers.
“It’s kind of asking the police to arrest someone just because he looks suspicious,” said Louis Marckesano, airline industry analyst with Janney Montgomery Scott in Philadelphia. “The Department of Transportation was in a similar spot. Icahn said that he would not dismantle TWA. . . . They can’t take any action against him until he has taken control and done some of these things.”
In its statement, the Transportation Department said that, while it had jurisdiction to institute a fitness investigation, “TWA has not provided a compelling justification” for one. The department said two criteria must be met before it exercise its authority in such cases: the likelihood of a change in control must be strong, and there should be a “compelling case” of lack of fitness.
“No such case of lack of fitness has been made with respect to Mr. Icahn,” the department stated.
The finding may be academic. Sources close to TWA said Friday that the airline’s board is considering a rival offer to buy the company. Resorts International, a casino-hotel company with casinos in Nassau, the Bahamas and Atlantic City, N.J., has offered to acquire TWA at between $20 and $23 per share.
Icahn has offered $18 per share for the two-thirds of the company that he does not already control. Asked Monday whether he would be willing to sell his 11.23 million shares, which he acquired at an average price of $16, Icahn indicated that he would.
“While I really like this company,” he said, “it is obvious that the bidding could reach certain levels where I won’t compete. But I haven’t seen any offers.”
Texas Air Corp., the parent of Continental Airlines, is reported to have also made an offer for TWA. But a spokesman, William Moran, denied this. A spokesman for Eastern Airlines, which had been considering a bid, said Eastern has pulled out of negotiations.
A Resorts acquisition of TWA could face some obstacles. A Transportation Department spokesman said Monday that there are three criteria used to judge fitness for certification to operate an airline: managerial expertise, adequate financial plans and a favorable disposition to comply with regulations. The spokesman said that, if an applicant had problems with any agency, federal or otherwise, they might fail the fitness requirements.
Resorts has been accused of making questionable payments to government officials in the Bahamas. The companies and its officials have denied any wrongdoing.
However, the New Jersey attorney general is attempting to lift Resorts’ gambling license in that state. The case is in the courts and could be construed as a violation of the third fitness requirement.