Shareholders Back Effort to Take TWA Private

Shareholders of Trans World Airlines Inc. on Wednesday overwhelmingly approved Chairman Carl C. Icahn’s proposal to buy their shares and take the nation’s seventh-largest airline private.

But opposition to the move mounted among TWA employees as the 3,300-member pilots union sued Icahn in New York State Supreme Court to block the privatization.

At a special meeting, TWA shareholders not affiliated with Icahn voted 3,714,740 shares in favor of his privatization plan and 146,061 against. Icahn voted his shares with the majority, making a final vote of 27,159,478 for and 146,061 against.

The approval had been widely expected by financial analysts and TWA employees.

“We’ve gone through quite a bit together,” Icahn told shareholders before the vote. “We, of course, were beset by problems . . . (but) I left my money in to keep the company running.”

Dropped Similar Plan

Icahn, a wily takeover specialist who took the reins of TWA a little more than two years ago, controls the airline through a complex myriad of financial entities that own about 77% of its 30.5 million common shares outstanding.

He dropped a similar proposal to go private after last October’s stock market crash, then came back with a revised bid in April.

Under the plan, shareholders not affiliated with Icahn would receive for each share of common stock $20 in cash and $30 in face amount of 12% notes due in 2008.

Airline industry analysts estimate that the bid puts a value of about $40 a share, or $304.8 million, on the TWA shares that Icahn doesn’t already own. TWA stock closed at $36.75 Wednesday on the New York Stock Exchange, up 37.5 cents a share.

Entities controlled by Icahn would receive, for each common share, $20 in cash and a new issue of preferred stock and a retained share of common stock.

After completion of the transaction, expected in a month or so, Icahn and the entities controlled by him would own about 90% of TWA’s stock. The remaining shares would be owned by an employee stock ownership plan.

TWA has also said that upon completion of the deal it intends to pay off at least $64.5 million of its $2.3-billion debt and seek the consent of holders of some preferred stock to eliminate voting rights on that stock and to exchange other preferred issues for 12% notes.

Union Serves Papers

Icahn said TWA will have about $1 billion in cash after the deal, an unspecified portion of which will be used to purchase new aircraft to upgrade the international carrier’s fleet.

At the start of the meeting, Capt. Thomas Ashwood, master chairman of the TWA pilots union, attempted to serve Icahn with legal papers related to the union’s suit against the privatization. The papers were accepted by Mark Buckstein, TWA general counsel, as some attending the meeting applauded.

In its suit, the pilots union alleges that Icahn’s plan to go private is a breach of the agreements that the union made with him during his takeover of the carrier. As part of those agreements, the pilots accepted a 26% pay cut, work rule changes and other concessions they say amount to $300 million over three years.

The pilots are seeking an injunction blocking the privatization and a court order enforcing their contracts.

“We won’t stand idly by while Carl Icahn strips our airline of assets and keeps it from growing financially stronger, from buying airplanes and from improving service to our passengers because of heavy debt,” Ashwood said in a statement.

Other Suits Likely

The pilots’ action intensified union opposition to Icahn’s plan. Last week, the union representing TWA flight attendants asked the Department of Transportation to block the privatization and freeze the airline’s assets while it investigates Icahn’s fitness to continue managing the airline.

The machinists and flight attendants at TWA also plan to file lawsuits similar to that brought by the pilots union, Ashwood said.

Icahn bristled at criticism leveled at him during the meeting by a representative of the flight attendants.

“We will not be dictated to by employees concerning how to run this airline,” he said.

After the meeting, Icahn told reporters that he was disturbed by the pilots’ lawsuit.