TWA Will Acquire Ozark Airlines : $224-Million Deal Already Approved by Carriers’ Boards

Trans World Airlines Chairman Carl C. Icahn announced Thursday that TWA will acquire Ozark Holdings Inc., parent company of Ozark Airlines, for about $224 million. He said the deal had been approved by both companies’ boards of directors.

Icahn said Ozark shareholders will receive $19 per share in cash for their holdings; Ozark has about 11.8 million common shares outstanding.

Icahn, who became head of TWA, the nation’s fifth-largest air carrier, last month, said he believes there will be no difficulty obtaining government approval for the acquisition even though the two carriers compete on many routes. After the merger, he said, the two airlines will have about 70% of the airline passenger traffic in and out of St. Louis, where Ozark is based.

Ozark has expanded rapidly since 1975, when it moved its hub from Chicago to St. Louis, and now serves 65 cities in 25 states, mostly in the Midwest. However, its service extends as far as New York, Miami, Milwaukee and San Diego, to which it has two flights a day.

Ozark, which carried 55 million passengers last year, offers only one high-density passenger class. It prides itself on in-flight wine tastings from a selection of 59 domestic and imported wines (three different wines per flight) and on its exotic menus.

Icahn said Thursday that Ozark will retain its separate identity for the time being but that that might change later.

The line, which owns 50 aircraft to TWA’s fleet of 162, had a profit of $636,000 last year, compared to $12.7 million in 1984. The decline, according to Ozark President Edward J. Crane, was due to increased competition, fare discounting and increased costs of doing business.

TWA lost $193.1 million in 1985 on revenue of $3.73 billion. A year earlier, TWA had a profit of $29.9 million on revenue of $3.53 billion.

Icahn said Thursday that TWA expects to lose $123 million in the first quarter of 1986 and that Ozark is also in the red this year. By combining “two losers,” he said, “we hope to create one profitable carrier. My goal has always been to acquire Ozark, and now I have achieved it.”

TWA approached Ozark with the offer a few weeks ago, he said, but added that officials of the two airlines had first discussed the possibility of a merger last year.

Louis Marckesano, airline analyst for Janney Montgomery Scott, a Philadelphia brokerage firm, said the price of $19 a share is fair to Ozark shareholders. “If you had asked me six months ago,” he said, “I would have said that Ozark was worth $15 a share. They (the shareholders) are getting what it is generally worth, plus the premium for the takeover.”

Ozark stock, which is traded on the American Stock Exchange, closed Thursday at $18 a share, down 25 cents.

The proposed merger is the latest in a trend toward consolidation in the airline industry. Other recent examples of the trend are Texas Air’s plan to buy troubled Eastern Airlines and Northwest’s proposed acquisition of Republic.

Thomas Canning, airline analyst for Standard & Poor’s Corp., a research firm, said he believes that TWA is buying Ozark in order to eliminate some of its competition in St. Louis. “Since TWA has never made a great success of its St. Louis hub,” he said, “it is a plus to take away one of its competitors.”

Canning and other analysts said the government might permit the merger only if some of the combined carrier’s St. Louis gates or landing-right slots are sold to other carriers, satisfying the requirments of antitrust laws.

Icahn said financing for the acquisition of Ozark is being arranged by the New York investment banking firm of Drexel Burnham Lambert.

On another matter, Icahn said at his news conference that there is a “strong possibility” that TWA flight attendants will strike next week, adding that the airline has sought $88 million in wage and benefits concessions from the attendants. Replacements are ready to take over in case of a strike, he said.