Allegis Unveils $3-Billion Plan to Restructure, Fend Off Suitors

Allegis Corp., moving to thwart an unwelcome takeover attempt, Thursday unveiled a $3-billion corporate restructuring that will include a special payment of $60 per common share.

Shareholders would retain their Allegis stock under the plan, and the company said its existing businesses, United Airlines, Hertz Corp. and Westin and Hilton International Hotels, would be retained. Chicago-based Allegis changed its name from UAL last month.

The company’s plan would more than double its indebtedness. Allegis has 58 million shares outstanding, resulting in a total payout of about $3.48 billion.

“This move is meant to keep the company intact,” said Thomas M. Canning, airline analyst with Standard & Poor’s Corp. in New York.

Earlier this week a New York investment group, Coniston Partners, said it had acquired 13% of Allegis and that it planned a proxy fight to install its own board and sell off Allegis assets. There have been other takeover threats in the past several months, and UAL’s pilots said recently that they wished to buy the airline from the parent company for $4.5 billion.

Shareholders Dissatisfied

Some analysts have predicted that a takeover may succeed because Allegis shareholders are believed to be unhappy with the corporation’s expensive diversification program. Shareholders are also said to be dissatisfied with the return on their investment in the holding company.

The restructuring plan, which the company said has been under study for two months, makes it clear that the board heard those shareholder complaints.

“The decision to pursue the proposed recapitalization now is based on the board’s conclusion that it is necessary to provide shareholders with a substantial increase in the near-term value of their investment,” the statement said. “The board believes that the proposed recapitalization would do so while permitting shareholders to benefit longer term from the integrated travel services concept.”

The plan, which requires shareholder approval, calls for Allegis to borrow $3 billion to pay the special dividend and to refinance some of its existing debt. A spokesman said the company’s debt is now about $2.2 billion.

Some analysts said they believe that the plan will give Allegis too high a debt load. The interest Allegis would have to pay on the debt “makes it very unlikely that Allegis will be profitable in 1987,” said Paul Karos, airline analyst with the New York-based L. F. Rothschild, Unterberg, Towbin.

But, he added, it would likely put an end to takeover efforts. “There is nobody now who would desire to take over the company because it is not an undervalued stock any more.”

Stock Rose Sharply

Hans Plickert, airline analyst with E. F. Hutton & Co., said the additional borrowing would give the company problems with its credit rating, thus making it more difficult and expensive for Allegis to borrow.

The restructuring announcement sent Allegis stock up sharply on the New York Stock Exchange. It was the third most actively traded issue Thursday, closing at $87.625 a share, up $8.50.

Observers also said that Allegis shares may settle somewhere between $80 and $100 after the $60 per share payout. That would mean a windfall for Coniston Partners, which bought 7.7 million shares at an average price of $67.

If the stock reached $90, for example, Coniston would have a profit, on paper, of about $177 million.

Augustus K. Oliver, a partner in Coniston, said in an interview that his company is studying the plan, adding that it is too early to say if Coniston will sell its stock or continue its takeover effort.