Pan Am Calls On Citicorp for Merger Advice
Troubled Pan American World Airways indicated strongly Wednesday that it is shopping for potential merger partners and has engaged Citicorp Investment Bank to provide “financial, as well as merger and acquisition advice.”
Pan Am said the Citicorp unit “will review and evaluate the various options available to Pan Am Corp.” Pan Am, which also said Citicorp is arranging up to $150 million of financing for the airline, has been rumored for the past few weeks to be engaged in merger talks with American Airlines.
A Pan Am spokeswoman declined to elaborate on the announcement, saying, “We never comment on such things.”
But Timothy Pettee, airline analyst with the New York brokerage of Bear, Stearns, said, “This signals that they (Pan Am) will entertain any interest from other carriers and that those carriers should contact Citicorp.”
Pettee said Pan Am’s poor performance both on its Atlantic routes last summer and on its domestic routes have put it “in a position where it might have to seek a partner, as opposed to being in a position of playing hard to get.”
Scott Drysdale, airline analyst in the Seattle office of the San Francisco brokerage of Birr, Wilson, said, “Sounds to me like they’re getting ready to sell the company.”
The Pan Am statement came in conjunction with a rejection by the troubled airline of a proposal by its unions to restructure the company.
Pan Am said its board of directors, which met here Tuesday, was “encouraged” by labor’s “recognition that action is needed to reduce costs.” But it added that it could not accept a plan calling for “undefined and temporary labor concessions in return for issuance of over $330 million of stock to employees, a move that would significantly dilute the present shareholders’ interest in the company.”
The company also rejected union proposals that labor be represented on the Pan Am board and that the company’s profitable Pan American World Services subsidiary be sold to supply operating funds for the airline.
The proposals were made to Pan Am Chairman C. Edward Acker last week. In response to the Pan Am board’s rejection, the unions said Wednesday that they will seek another airline to acquire Pan Am.
