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Northwest Airlines Spurns Shareholder Group’s Offer

Times Staff Writer

The parent of Northwest Airlines, the United States’ largest air carrier in the northern Pacific, said Tuesday that a shareholders group had expressed interest in buying the airline but that it had rejected the idea.

NWA Inc. said the shareholders group, which it did not identify, owns 4.9% of NWA’s stock. The news drove the stock price up $9.75 in trading on the New York Stock Exchange on Tuesday to close at $71.375. It was the third most active stock on the Big Board as 2,097,900 shares changed hands.

NWA said that its board had determined its “employees, customers and shareholders will be best served by maintaining the company as an independent entity.”

The airline, which owns valuable real estate in Tokyo and operates key Pacific routes, has been a rumored takeover target for several months. Last fall, NWA rejected as inadequate a $200-million offer for its Japanese properties.

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In a statement, NWA said its board had enacted a “poison pill” takeover defense Monday but added that the measure would not prevent it from considering an offer that “was in the best interests of the shareholders.”

NWA, based in Eagan, Minn., merged with Republic Airlines in January, 1986, to become the nation’s fifth-largest airline. It reported record earnings last year of $135.1 million on revenue of $5.65 billion.

Airline industry analysts said Tuesday that Northwest has largely overcome the problems with lost baggage and delayed flights that followed its difficult merger with Republic. However, the airline is still negotiating with its pilots over delicate seniority and salary issues stemming from merger.

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Northwest’s domestic route system is smaller than those of its principal competitors and is used largely to feed its international routes. It is the largest U.S. air carrier to Japan and other northern Pacific countries, with about 54% of the traffic, said Kurt A. Rivard, an analyst with the Dain Bosworth investment firm in Minneapolis.

It is also the largest domestic carrier at the Minneapolis, Detroit and Memphis airports. The airline flies 18 flights a day from Los Angeles International Airport to Tokyo, Seoul and seven U.S. cities. Northwest is the only domestic passenger carrier to operate a separate freight fleet.

Much of the speculation surrounding a NWA takeover has concerned the company’s Japanese real estate and the value of its northern Pacific routes. Timothy Pettee, an airline industry analyst with the New York investment firm of Bear Stearns, has estimated the value of NWA’s real estate in Japan at $350 million but said it could be worth as much as $600 million. However, NWA spokesman Kevin Whalen stressed Tuesday that the company’s real estate holdings are not for sale.

A good deal of speculation has also surrounded the identity of the shareholder group that is interested in the airline. Among the names frequently mentioned are Coniston Partners, a New York investment firm that prodded United Airlines into a financial restructuring, and the Pritzker family of Chicago, whose holdings include Hyatt hotels. Spokesmen for Coniston and for the Pritzers refused to comment Tuesday.


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