Allegis Sues to Head Off Suitor From Launching a Proxy Fight
Demonstrating yet again that it is jittery about the threat of a takeover, giant Allegis Corp., parent of United Airlines, has filed suit to prevent a private investment group from launching a proxy fight.
Allegis accused Coniston Partners of “huckstering” and using “half truths” in their attempt to gain control of Allegis. The suit was brought in U.S. District Court in Delaware on June 2 and came to light Friday.
New York-based Coniston had said in filings with the Securities and Exchange Commission last month that it had acquired 13% of Allegis and that it would try to win voting control of the travel conglomerate, which also owns the Hertz car rental company and the Westin and Hilton International hotel chains. If successful, it plans to cut up Allegis and sell off its pieces.
In its initial attempt to fend off suitors, Chicago-based Allegis had said on May 28 that it planned a $3-billion corporate debt restructuring of the company. Shareholders would be paid a one-time dividend of $60 per share.
The Allegis suit names LA Partners, an entity owned by Coniston. It seeks an injunction that would prevent the investors from seeking control of Allegis, which changed its name from UAL Corp. on May 1.
Coniston said it would seek the support of more than half of Allegis’ shareholders. This is the proportion required for control under the securities laws of Delaware, where Allegis is incorporated. The group is seeking “consents,” or votes that would give it the ability to oust the current Allegis board of directors.
“Pursuing their scheme, the group has been illegally soliciting consents to remove the majority of Allegis’s current directors and to replace them with nominees handpicked by the group,” the suit said. “To accomplish this scheme the group has been using the financial press to publicize its purported plan to break up Allegis’s three principal businesses. This is counter to Allegis’s board’s current strategy, which is to build an integrated travel company.”
A partner in the investment group, Augustus K. Oliver, declined to comment on the suit late Friday but said that proxy solicitation had not yet begun.
Allegis also criticized the investors for not having any definitive plan of action for Allegis. It complained that shareholders were making decisions based on disclosures to the press, “not the fine print contained in SEC filings.”
“Perhaps the most misleading aspect of the group’s solicitation,” Allegis said, “is its use of half truths to excite investors about the plan to disassemble Allegis. . . . Although the group has purchased Allegis shares with a view to breaking up the company, the group actually has formulated no definitive plans with respect to Allegis. . . . (Stockholders) will have formed their opinions in reliance on the huckstering statements defendants have made and which the press has reported.”
In another development, Allegis said it was studying a restructuring proposal made Thursday by United’s pilots. It said that, on preliminary review, several parts of the plan are unclear and need clarification. The company also said it plans to hold talks with the pilots’ financial advisers on the proposal.
On April 5, the pilots expressed interest in buying the airline from Allegis for $4.5 billion, a move that made the corporation a takeover candidate on Wall Street.
Under the pilots’ latest proposal, shareholders would receive at least $70 a share in cash and some securities from the sale of the company’s non-airline businesses. United Airlines would be spun off to employees and shareholders.
The pilots union revealed that two British financiers, David and Frederick Barclay, offered to take part in the plan by acquiring Hilton International Co. for $1 billion in cash. The pilots did not mention any prospective buyers for Hertz or Westin. The Barclays have extensive banking and brewery holdings.
