Stock to Go Into Voting Trust : U.S. Limits USAir Buyout to 51% of Piedmont Shares
The Department of Transportation gave USAir Group permission Friday to acquire a controlling interest in Piedmont Aviation but denied its application to buy--and keep--all of Piedmont’s shares.
USAir, which reached agreement with Piedmont’s board of directors earlier this month on the $1.6-billion merger, must put the shares acquired in a tender offer into a voting trust pending final action on the merger itself by the Transportation Department.
USAir had asked for a 100% trust fund, but the Justice Department recommended against that. Friday’s action by the Transportation Department allows USAir to offer to buy all of Piedmont’s shares, but it may put only 51% in the voting trust and must dispose of any excess.
Although the Transportation Department approved all the airline mergers that came before it last year, some observers said they expect the proposed Piedmont-USAir consolidation to run into trouble. Antitrust concerns might be raised because of the large number of markets in which the two carriers are the only competitors.
If it is approved, the merger would create the nation’s seventh-largest airline in terms of revenue passenger miles (one paying passenger carried for one mile).
Interested parties may now send comments on the proposed acquisition to the U.S. Department of Transportation.
The March 5 agreement by USAir, headquartered in Arlington, Va., and Piedmont, based in Winston-Salem, N.C., came at the same time that Carl C. Icahn, chairman of Trans World Airlines, made an unsolicited offer to take over USAir.
However, the Transportation Department said that TWA’s application to acquire the company failed to comply with rules on airline mergers, and a federal judge ordered Icahn to temporarily halt his purchases of USAir stock.
On March 10, TWA said it was reassessing its efforts to acquire USAir because of the various obstacles to the deal, and on Monday TWA said it would not pursue the bid at present. On Friday, it said the two companies had formally agreed that TWA would buy no more USAir stock before April 23 and would not do so after that without giving USAir 14 days’ notice.
