Pritzkers and Marriott Said to Want Allegis

The Pritzker family of Chicago is reportedly lining up financing to buy Allegis Corp., which announced earlier this month a plan to divest some of its major operating groups and retain its largest unit, United Airlines.

Marriott Corp., the Bethesda, Md.-based hotel chain, is reportedly participating in the Pritzker effort to take over Allegis, according to a report in Crain’s Chicago Business. Crain’s said Marriott is also lining up financing.

Marriott officials have queried two of the three major unions representing United Airlines about the possibility of a buyout, while Pritzker representatives continue to hold meetings with the United branch of the Air Line Pilots Association, said Crain’s, which did not specify the other unions.

But a Marriott spokesman Sunday issued a statement declaring that “Marriott is not currently involved in any negotiations on this matter.”

While the statement appeared to rule out an effort by Marriott to be a direct party to an acquisition effort, it did not preclude an effort by Marriott to purchase Allegis units, such as Hilton International and Westin Hotels, that might be spun off from an acquisition.

The Marriott spokesman added, “Marriott is active in the marketplace . . . and in the right circumstances we would be interested in Hilton or Westin.”

The Pritzkers were not available Sunday for comment. A spokesman at the family’s privately held holding company, Marmon Group Inc., said there had been considerable speculation about the family’s interest in Allegis, but he could not comment on the current reports. The Pritzker family owns nearly 65 companies with sales of $3 billion, including a controlling interest in the Hyatt Hotel chain and Braniff Airlines.

According to the Crain’s report, Marriott and Hyatt would take control of Allegis and then sell United Airlines and Allegis’ Hertz car rental unit to finance the deal. They would then split the hotel assets between them, the weekly newspaper said.

Marriott reportedly had attempted to acquire the Hilton International chain last year when it was taken over by United Airlines. Marriott has mounted an aggressive acquisition effort in recent years, buying Saga Corp. and recently agreeing to acquire the Denny’s restaurant chain.

Allegis announced a plan to restructure the company on June 10, when the company board ousted Chairman Richard J. Ferris, who had set the strategy of building Allegis into a full-service travel chain, providing airlines, car rental and hotel services. Under the restructuring, Allegis would spin off its hotels and car rental businesses and retain United Airlines.

The restructuring plan came amid buyout pressures from several groups. The pilots of United Airlines have made two proposals to buy the company, and another employee group also has made an offer. New York-based Coniston Partners acquired a 13% share of Allegis earlier this month and threatened a buyout. In a move widely interpreted as a takeover defense, Allegis arranged for Boeing to purchase notes that are convertible to 15% of its common shares; the note purchase was announced concurrently with a deal to buy Boeing aircraft.

A takeover of Allegis would cost an estimated $7 billion.

The Pritzker-Marriott interests hope to acquire Allegis’ hotel assets at a lower price than the units would fetch if auctioned off, as Allegis now contemplates, Crain’s said.

The value of Allegis’ 61 Westin hotels, as stated on the company’s books, is estimated at about $1.2 billion, but they are likely to go for a much higher price if a bidding war develops, according to observers quoted in the Crain’s story.