TWA Reassesses Stalled USAir Takeover Plan
Trans World Airlines, frustrated by obstacles to a speedy takeover of USAir Group Inc., announced Tuesday that it is reassessing its strategy, an indication that the international carrier might scrap the effort.
The announcement came a day after USAir and Piedmont Aviation Inc. agreed to proceed with a merger in which USAir will pay $1.59 billion for Piedmont, and only moments after a federal judge extended a temporary order barring TWA from increasing its 15% stake in USAir stock.
The USAir-Piedmont marriage would create the nation’s seventh-largest airline, dominating several markets in the East. Analysts said the merged airline would be significantly harder for TWA to acquire than USAir alone.
“In light of the merger agreement between USAir and Piedmont that was announced yesterday, TWA is reassessing its strategy relating to its investment in USAir stock,” said Mark Buckstein, the airline’s general counsel.
Buckstein would not elaborate, and TWA Chairman Carl C. Icahn was not available to answer questions, a secretary at his New York office said.
But industry analysts said the statement appeared to suggest that Icahn, a wealthy takeover strategist who won control of TWA last year, might abandon the $1.65-billion offer for USAir and look at alternatives.
Speculation on Icahn’s options ranged from a takeover bid for a smaller airline to a sweetened offer for the USAir-Piedmont combination at an unspecified date.
Some analysts suggested that Icahn wants to sell TWA, while others predicted that he would continue a restructuring that has started to make the airline profitable after years of heavy losses.
“TWA a year from now, if it’s healthy and well, maybe could go ahead with a Piedmont-USAir acquisition,” said Louis Marckesano, airline analyst for the Philadelphia investment firm Janney Montgomery Scott Inc. “In the meantime, TWA’s best option is to come up with other marketing arrangements.”
Anthony Hatch, who follows airlines for the New York firm Argus Research Corp., said TWA’s extensive overseas routes may be attractive to airlines such as American, Delta or Northwest, which are attempting to expand their international presence.
On the other hand, TWA is deeply indebted and its 215-plane fleet is one of the industry’s oldest, detracting from the airline’s value. Icahn has suggested that he would not invest in new aircraft.
TWA earned $85 million in the last quarter of 1986, compared to a loss of $123.42 million in the same period of 1985. The widespread view is that TWA could earn as much as $100 million this year, against losses of $106.3 million last year and $193.1 million in 1985.
Despite USAir’s apparent success at defeating or stalling the TWA takeover, legal elements of the battle remain unresolved.
USAir has sued TWA, challenging the purchase of its stock, on grounds that the amount exceeded the level allowed under federal antitrust rules. On Tuesday, U.S. District Judge Maurice Cohill in Pittsburgh extended until March 23 a temporary order prohibiting TWA from buying more USAir shares.
TWA still has a pending takeover application filed with the Department of Transportation and has sued USAir to challenge its “poison pill” anti-takeover defenses.
