Kerkorian Group Studying Pan Am Favors a Takeover : N.Y. Buyout Firm TFC Also Announces Interest in Airline
A group appointed by millionaire Beverly Hills financier Kirk Kerkorian to study troubled Pan American World Airways has recommended that he make a major investment in the carrier and take it over, Kerkorian’s No. 2 man said Monday.
Separately on Monday, New York-based TFC Towers Financial Corp., a leveraged buyout firm, announced that it also is interested in taking over and restructuring the ailing airline for between $50 million and $100 million. The firm said it is seeking to enlist John F. Lehman Jr., who was secretary of the Navy from 1981 until early this year, to head the effort.
Pan Am, which lost $463 million last year, is remarkable among major American airlines because it has not been involved in a merger during the past three years of post-deregulation merger frenzy. It did, however, sell its Pacific routes to United Airlines for $750 million early last year and has been the subject of continual takeover speculation during the period.
The Kerkorian study group was headed by Donald Lloyd-Jones, a former president of Western Airlines and Air Florida who also worked for many years for American Airlines. Jones headed a team of six that spent a month at Pan Am’s New York headquarters studying the airline’s financial condition, its routes and its labor agreements, among other things.
Major Hurdles
Lloyd-Jones and his group “were encouraging about the prospects of Kirk’s taking it over, putting Pan Am under our management,” Terry Christensen, president of Kerkorian’s holding company, Tracinda Corp., said Monday in a telephone interview. “They gave us a favorable recommendation.”
Christensen said, however, that there are major hurdles to overcome before Kerkorian would become involved financially. These, he said, included the arranging of financing for such a transaction, getting concessions from Pan Am’s labor unions and obtaining approval for an expansion of the carrier’s terminal at John F. Kennedy Airport.
He added that the situation is “complicated” and that if Kerkorian reaches agreement with the management of Pan Am, his involvement must then be recommended to and approved by the airline’s board.
Christensen declined to comment on reports that Kerkorian could take control of the Pan American for as little as $50 million. “We won’t discuss numbers,” he said.
He also said that he did not know how long the process would take. “I don’t mean to be facetious,” he said, “but in this situation all of the angels must dance on the head of the pin at the same time.”
Steven Hoffenberg, chairman of Towers Financial, said in a telephone interview that his company, before settling on Lehman, had considered numerous candidates to head its attempt to take over Pan Am.
“We drafted him,” said Hoffenberg. “He is our candidate.” The financial company said that it is “negotiating” with Lehman, who could not be reached Monday.
Hoffenberg said, “We would love to have Kirk Kerkorian back John Lehman in his effort.” But Christensen, the Kerkorian executive, said, “They have absolutely nothing to do with us.”
Towers Financial owns no Pan Am stock, according to its chairman. The company, which has about $80 million in assets, owns Associated Life Insurance and United Fire Insurance. Towers Financial, whose stock began trading on the over-the-counter market a year ago, had profit of $4.3 million on revenue of $95.2 million in the fiscal year ended June 30, Hoffenberg said.
A Pan American spokesman, James A. Arey, said of Towers: “We have not heard of them. But, if it’s Monday, somebody is saying, ‘Let’s take over Pan Am.’ ”
Anglo-French financier Sir James Goldsmith also studied Pan Am’s books not long ago but decided against becoming financially involved. The airline’s unions have played an active role in seeking an investor to rescue Pan Am, encouraging the studies by both Kerkorian and Goldsmith.
Kerkorian, who is also head of MGM/UA Communications and has had many holdings over the years in motion picture companies and gambling casino/hotels, is no stranger to the airline business. He recently launched an all-first-class carrier, MGM Grand Air, which flies between Los Angeles and New York.
He began his commercial air transport career after World War II by flying gamblers from Los Angeles to Las Vegas in a surplus bomber.
In 1948, he founded Transamerica Corp., and from 1969 to 1976, he was a director of Western Airlines and its major shareholder.
He tried at one point to merge Western with American but the deal fell through.
