Ueberroth Group Agrees to Buy Eastern, Share It With Employees
A group led by former baseball Commissioner Peter V. Ueberroth has agreed to buy Eastern Airlines in a $464-million deal that would give the strike-crippled carrier’s employees a major share of the company, the parties announced today.
The deal, subject to approval by Eastern creditors and the U.S. Bankruptcy Court, followed lengthy negotiations with Eastern’s parent Texas Air Corp. and was greeted with cheers by union members locked in a bitter struggle with Eastern management.
The purchase was also conditioned on Eastern reaching new work agreements with its striking unions by April 10.
Under the deal accepted by Texas Air, Ueberroth and Thomas Talbot, a former airline executive from California, would own 30% of the airline. Eastern’s unions would get another 30% of the company in exchange for wage and work-rule concessions.
Drexel Burnham Lambert Inc. and Ardshiel Inc., a smaller New York firm, will place securities for the remaining 40% of the company.
At a news conference, Texas Air Chairman Frank Lorenzo said if the unions agreed to the deal, the nation’s seventh-largest airline could resume flying 24 hours later. He also said the airline intended to file a bankruptcy reorganization plan that would pay creditors 100%.
Lorenzo will remain in charge of Eastern until the deal is approved, but Ueberroth will participate in formulating the reorganization plan.
Lorenzo said the purchase includes about $200 million in cash and the rest in securities.
Miami-based Eastern has been virtually paralyzed since March 4 by a machinists union strike that has drawn the support of pilots and flight attendants. Eastern filed for reorganization and protection from creditors in U.S. bankruptcy court in New York on March 9 as its cash dried up.
“To sum it up, it’s a mammoth challenge. I’m convinced that there is a spirit amongst the people in the company that I can help bring together to help this airline,” Ueberroth said.
Texas Air would get $200 million in cash, Eastern notes worth about $185 million, plus Eastern assets valued at about $79 million, including Eastern’s Miami-London and New York-Montreal routes, plus eight landing slots and one gate at New York’s LaGuardia Airport.
About 500 striking machinists jammed their local union hall in Miami, chanting and cheering “Hey, hey! Ho, ho! Lorenzo’s got to go” and “Take me out to the ballgame” as they heard news of the sale.
