PS Group Estimates PSA Sale Would Bring $279 Million
PS Group, which holds 83% of Pacific Southwest Airlines’ stock, would receive an estimated $279 million if USAir Group concludes its $400-million bid for the San Diego-based airline, according to proxy statements prepared for PS Group and PSA shareholders meetings scheduled for March 17.
PS Group, the former PSA Inc., could bolster its working capital by as much as $27 million after paying off debt, taxes and sale-related expenses, according to the proxy.
However, PS Group anticipates that it will suffer a pretax loss for both the fourth quarter that will be “significantly higher” than the $1.4-million net loss generated during the fourth quarter of 1985.
And, PS Group, which reported a $9-million net loss for the nine-month period ended Sept. 30, anticipates a loss for the year ended Dec. 31.
According to the proxy, PS Group officers and directors, including Chairman J.P. Guerin and President Paul C. Barkley, own 11.2% of PS Group’s outstanding stock. In addition, Barkley and 27 other PSA officers and directors own 342,739, or 2%, of PSA common. USAir has offered to pay $17 per share if the deal is concluded.
The San Diego-based holding company likely would use cash from the proposed sale of PSA to expand its remaining energy production and sales businesses and an aircraft leasing subsidiary that will be retained. PS Group will also “consider becoming involved in other areas,” according to the proxy.
PS Group’s jet fuel trading and energy production subsidiaries reported a $5.4-million net loss and $237.9 million in revenue during 1985. The holding company’s gas and oil exploration and production business has been hurt by a downturn in oil and gas prices.
The jet fuel trading subsidiary, which generates about half of its revenue from fuel sales to PSA, intends to bid on all of USAir’s fuel business should the deal be completed. Washington-based USAir is expected to burn 450 million gallons of jet fuel during 1987.
In addition to a favorable vote at the March 17 shareholder meetings, USAir’s bid for PSA is subject to approval by federal regulators. And, USAir has demanded that PSA management win labor contract modifications from its unionized employees.
PSA declined on Friday to comment on negotiations which began this past Monday with the Teamsters Union that represents 3,200 PSA flight attendants, mechanics, ground and station personnel. Those negotiations are expected to resume Monday in Washington.
However, Teamsters officials Thursday told members in San Diego that “meaningful progress has been made” and that the union anticipates that a “final agreement can be reached next week.”
In a related development, U.S. District Court judges in Los Angeles and Washington in the past week ruled against two unions that had hoped to force Western Air Lines, which has been acquired by Delta Airlines, into binding arbitration over labor contract disputes.
Earlier this month, the Teamsters asked a U.S. District Court judge in San Francisco to force USAir and PSA to enter binding arbitration over a similar contract dispute. Airline industry sources familiar with PSA’s contracts with the Teamsters have suggested that the lawsuit against PSA likely would follow precedents set in the Western lawsuit.
