Pritzker Offer for Eastern Tops Ueberroth’s Bid : Hotel Magnate Jumps Into Fray, but Airline’s Fate Is Still Undecided
Hotel magnate Jay A. Pritzker of Chicago outbid Peter V. Ueberroth, outgoing commissioner of baseball, Thursday in a multimillion-dollar battle to gain control of Eastern Airlines, according to well-placed sources.
One of Ueberroth’s business partners, J. Thomas Talbot of Newport Beach, said in an interview in New York that the Ueberroth group had made a $464-million bid for the strikebound airline and that officials of Texas Air, Eastern’s parent, told them that they had received a “materially higher offer.” Talbot added, “we are out of the bidding.” One of Ueberroth’s lawyers said the group’s offer had been withdrawn.
By the end of the day, however, it was not clear whether Pritzker would ultimately acquire Eastern or if the airline would in fact be sold. Texas Air made no public comment, and a source close to Ueberroth said the company appeared to be “playing for time.”
Other sources said Pritzker, a 66-year-old billionaire who has long been interested in acquiring Eastern and who owns about 10% of Braniff Airlines, came back into the picture at Eastern quite recently. Pritzker could not be reached for comment Thursday night, and no details of his bid were available.
‘Not a Bidding Contest’
The board of Texas Air, which also owns Continental Airlines, met in Houston on Thursday to review the offers.
A source close to Texas Air said, “This is not a bidding contest. There is more at stake than just numbers. Frank Lorenzo (chairman of both Eastern and Texas Air) and the Texas Air board are concerned about the human element, and Mr. Ueberroth’s offer is being considered.”
However, a source close to Ueberroth responded Thursday night by saying, “That may be, but there is no bid. They can’t consider what doesn’t exist.” The source said he assumed that Texas Air had anticipated that Ueberroth would raise his bid when informed that Pritzker made a higher offer and was disturbed that he had not done so.
Under the Ueberroth bid, Eastern’s employees would have owned 30% of the company, Ueberroth and other principals would have owned 30%, and another group of investors would have owned 40%, according to Talbot and other sources close to Ueberroth. Talbot said the written offer was faxed from New York to Lorenzo in Houston.
Competing Bids
“It was our desire to form a new and positive standard working together with employees in this industry,” Talbot said. “We wish the company well and its employees well, and I hope they are back to work soon.”
Eastern has been able to get only about 10% of its 1,040 daily flights into the air since its unionized machinists went on strike March 4. Five days later, Eastern filed for protection from creditors under Chapter 11 of the U.S. bankruptcy code. Virtually all of the airline’s pilots and flight attendants have refused to cross the machinists’ picket lines.
Talbot said the Ueberroth bid was for all of Eastern, including the potentially lucrative northeastern air shuttle. He said $200 million of the bid would have been cash and the rest in debt securities.
Other sources said the Texas Air board also discussed competing bids for its Eastern shuttle from real estate tycoon Donald J. Trump and Phoenix-based America West Airlines, but no announcement was made on that issue either.
If Texas Air accepts Pritzker’s bid for Eastern, it still would have to be approved by Judge Burton R. Lifland of the U.S. bankruptcy court in New York.
Another critical element is whether Pritzker can make mutually agreeable arrangements with Eastern’s unions. Just before the International Assn. of Machinists went on strike against Eastern, the union had refused to accept about $125 million a year in wage and benefit reductions demanded by Lorenzo.
However, Eastern’s machinists, pilots and flight attendants have indicated that they are willing to make wage and work rule concessions to a new owner if there are strong indications that the owner plans to keep the financially ailing carrier operating and seek to make it profitable again.
Eastern has lost more than $500 million in the past two years, and the unions have asserted that Lorenzo has stripped it of valuable assets--such as its computer reservations system--in an attempt to run the company into the ground and build up his other airline, non-union Continental.
For the moment at least, Trans World Airlines Chairman Carl C. Icahn, who has been attempting to buy Eastern, appears to be out of the running. However, Louis Marckesano, an airline analyst with the investment firm of Janney, Montgomery, Scott in Philadelphia, said he still thought an Icahn purchase would make the most sense.
“Eastern would mean more to Icahn than to anybody,” Marckesano said. “Eastern, by itself, is going to have a hard time existing. I don’t think it is big enough to remain competitive enough unless someone puts massive capital into it. With another airline, such as TWA, there would be mutual support.”
But that is precisely why Lorenzo does not want to sell Eastern to Icahn, according to several sources. They said TWA, bolstered by Eastern’s planes, routes and gate slots, would represent a serious threat to Continental.
Union sources said Thursday that they would have to “wait and see” precisely the nature of Pritzker’s offer and what he wants from them before making a definitive assessment. However, one of the sources said, “we’re comfortable” with Pritzker because he was introduced to union officials by a friendly contact. He would not elaborate.
Pritzker has a long history of dealing with unions, primarily through the Hyatt hotel chain, but also through his interest in Braniff.
He is the chairman of Hyatt Corp., which has 135 hotels worldwide. The chain had about $1.8 billion in domestic sales for the year 1987; its affiliate, Hyatt International, had another $530 million in revenues that year, the latest period for which figures were available.
Most of the hotel chain is unionized. However, in recent years, the chain has not automatically agreed to sign contracts with unions to represent its workers as it once did, leading to bitter labor disputes at several hotels.
The Pritzkers, whose family fortune is estimated by Forbes magazine at $3.8 billion, also have a controlling interest, through the Hyatt Corp., in Las Vegas-based Elsinore Corp., which owns the 4 Queens Hotel in downtown Las Vegas and the Atlantis Casino in Atlantic City. The 4 Queens was the center of a protracted strike starting in 1984, along with a number of other Las Vegas hotels.
Henry Weinstein reported from Los Angeles and Robert E. Dallos from New York.
