Davis Prepares for Proxy Fight by Suing NWA Over ‘Poison Pill’
Millionaire oilman Marvin Davis sued NWA Inc. on Tuesday in an attempt to overturn the airline company’s newly adopted “poison pill” defense in what is shaping up as a fight for control of NWA’s board.
Davis said the poison pill stands in the way of a proxy fight he “expects to conduct” at the airline company’s May 15 shareholders meeting. A spokesman for Davis would not elaborate on the statement, which strongly suggests that Davis plans to nominate his own slate of directors for NWA’s board.
Meanwhile, NWA sued Davis to try to stop him from talking to its unions. NWA charged that Davis illegally interfered with its relationship with its unions, which represent 34,000 of its 38,000 workers.
The spokesman for Davis said Davis will fight the suit, which is scheduled for a hearing Thursday in U.S. District Court in Minneapolis. The spokesman said the unions have a right to “satisfy themselves about the plans and intentions of a new owner.”
The lawsuits came four days after NWA rejected as inadequate Davis’ $2.62-billion bid for the company, which owns Northwest Airlines. Davis, whose empire includes a Denver oil company, California golf courses and Colorado ski resorts, offered $90 a share for the airline company. Northwest has more flights to Japan and other North Pacific points than any other U.S. carrier.
The legal battle apparently helped drive up the price of NWA shares, which rose $1.25 Tuesday, closing at $88.75 in trading on the New York Stock Exchange.
Observers said it would be hard for Davis to mount a successful proxy fight so quickly. “If he spent enough money to publicize it, I suppose he could do it,” said Louis A. Marckesano, an airline industry analyst with the investment firm of Janney Montgomery Scott in Philadelphia.
NWA made no comment on Davis’ lawsuit, which was filed in Delaware, where NWA is incorporated. The plan would place special stock-purchase rights in the hands of shareholders in the event of a takeover, making the company more expensive to buy.
Davis has not disclosed how he would finance the acquisition, although he said he would not sell airliners or routes to do it. He is widely expected to sell the airline’s Japanese real estate, which airline analysts say is worth between $350 million and $600 million.
Davis, who owns 3% of NWA’s shares, is not the only one interested in buying Northwest. The company said previously that it had been approached by a group that owns 4.9% of its shares.
The group includes Los Angeles investor Al Checci and Gary Wilson, a former NWA director and chief financial officer of Walt Disney Co., according to William Genoese, director of the Teamsters union’s airline division. The Teamsters represent Northwest’s flight attendants.
NWA is also considering a management buyout that would include an employee stock ownership plan for its pilots, Genoese said.
Genoese said he has talked briefly with representatives of the Davis group and with the Checci group, and said “we can work with” either one. He said he is disenchanted with Steven Rothmeier, NWA’s chairman, in part because he has insisted on a two-tier pay scale for flight attendants. “He’s not a people-type guy,” said Genoese.
The union official said Davis indicated that he is willing to consider doing away with the two-tier pay scale, under which newly hired employees are paid according to a scale substantially lower than the one covering other workers. Genoese said he could not disclose what he discussed with Checci’s group.
NWA is in contract negotiations with its pilots, and a company spokesman said an ESOP is under negotiation. However, the spokesman said that the company does not view an ESOP as a defensive measure. Several companies, most recently Polaroid, have successfully fought takeovers by placing large blocks of stock in employee hands.
A spokesman for Northwest’s pilots said the union is interested in an ESOP but not necessarily to protect the airline company from a takeover.
