Texas Air to Bid for People Express, Reports Contend
Representatives of People Express Airlines and Texas Air Corp. remained tight-lipped Monday about the possibility of a takeover of People Express by the Houston-based airline conglomerate, as rumors of an imminent bid drove up the discount airline’s stock price.
While the Dow Jones industrial average suffered a record one-day drop of more than 61 points, People Express stock jumped $2.12 1/2 a share to $9.50 on heavy volume of 4.64 million shares in over-the-counter trading. Texas Air shares fell $2.25 to $32.37 1/2 on the American Stock Exchange.
Observers said intense negotiations took place throughout the Fourth of July weekend, but industry analysts were skeptical of a published report that Texas Air Chairman Francisco A. (Frank) Lorenzo had offered $12 per share, or $314 million, for the discount airline.
“I worked much of the weekend going over the asset value of People Express,” said Hans J. Plickert, airline analyst with E. F. Hutton & Co., a New York brokerage house. “The best I could come up with was $8 to $9 a share.”
Another analyst agreed.
Analysts Say Price Is High
“I think that $12 a share is much more than what People Express is worth,” said David Sylvester of Montgomery Securities in San Francisco. “I think its liquidation value is about $6 a share.”
The Wall Street Journal reported Monday that it had learned from sources it did not name that the Texas Air offer of $12 had been made over the weekend and that others were expected to be made by Los Angeles-based Western Airlines and Japanese interests.
The report said Texas Air had said Thursday that it would offer $11 per share for ailing People Express. At that point, Western Airlines was reported to have offered to match the Texas Air bid. On Friday, Texas Air was said to have raised its price to $12 a share.
The report said People Express, which had announced recently that it would sell all or part of the carrier because of serious financial problems, had also been approached by two Japanese entities, Mitsubishi Heavy Industries Ltd. and All Nippon Airways Co. Analysts questioned such intentions, noting that the Federal Aviation Act of 1958 (revised with airline deregulation in 1978) prohibits foreign interests from owning more than 25% of a U.S. airline.
One knowledgeable airline source said Monday that People Express executives “worked all weekend long getting this deal together.” But others wondered if all the talk of offers for People Express was nothing more than rumor, perhaps even leaked in an attempt to get a bidding war started.
Spokesmen for Western, People Express and Texas Air all declined to comment Monday.
