Northwest Airlines’ Parent Opposes Davis Offer; 2nd Suitor Gets Major Backing
NWA, the embattled parent of Northwest Airlines, advised its shareholders to reject a hostile $2.7-billion offer from Los Angeles billionaire Marvin Davis, opening the door to higher bids for the company.
Noting that NWA’s current stock price exceeds Davis’ $90-a-share offer, NWA’s board rebuffed his bid as “inadequate, unfinanced and not in the best interests of the company, its stockholders” and employees. NWA’s action was expected, since it had earlier rejected a friendly $90-a-share offer from Davis, the former owner of 20th Century Fox.
Meanwhile, a second NWA suitor, Los Angeles investor Alfred A. Checchi, has enlisted support from Elders IXL, a powerful Australian conglomerate. The involvement of Elders--one of Australia’s biggest companies, with far-flung interests in beer, wine, livestock, hotels and financial services--indicates that Checchi potentially has substantial financial resources at his disposal.
In rejecting Davis’ tender offer, NWA expressed a willingness to work with him “to produce a transaction that is in the best interests of all NWA shareholders.” NWA shares closed Monday at $102.75, up 25 cents, in trading on the New York Stock Exchange.
A spokesman for Davis said the investor was “extremely disappointed” with NWA’s response to his tender offer. But the rejection “does not in any way change our plans or alter our resolve to acquire the company,” the spokesman said.
In addition to his tender offer, Davis is trying to replace the NWA board of directors with his slate. He has also taken his battle to acquire NWA to court, where a Delaware Chancery Court judge Monday delayed a decision on Davis’ suit to overturn key provisions of NWA’s “poison pill” anti-takeover defense. Meanwhile, in federal court in Minnesota, NWA charged Davis with using his tender offer to manipulate the price of NWA’s stock.
‘Expressions of Interest’
NWA, the dominant U.S. air carrier to Japan and other northern Pacific countries, said its board is reviewing alternatives to “enhance shareholder value,” including issuing a special dividend to shareholders or buying back some of its shares. The company has also said it would review offers from third parties.
A spokesman for the airline, based in Eagan, Minn., said NWA has received 10 to 15 “expressions of interest” and that its board had started to review those offers Monday.
The spokesman said NWA’s chairman, Steven G. Rothmeier, believes that the best course of action is for the company to remain independent. But if that is not possible, Rothmeier would like to find a white knight, or a friendly investor, who is willing to take a large ownership interest in the company and work with current management.
The spokesman said Rothmeier believes that a white knight may be found among the parties who have expressed an interest in the company. The spokesman would not name or characterize the parties who have expressed interest.
Davis Balked at Signing
The interested parties were asked to sign confidentiality agreements with NWA in order to obtain secret financial information about the airline. The information is being distributed to help possible bidders come up with an offer for the company.
Davis has balked at signing the agreement because it bars signers from launching a hostile tender offer for the company. Davis’ chief rival, Checchi, plans to sign the confidentiality agreement.
Checchi is said to be interested in acquiring the entire airline, as opposed to taking a large stake in the company to protect it from Davis or another unwanted suitor. Checchi’s group, which also includes Gary L. Wilson, chief financial officer of Walt Disney Co., owns 4.9% of NWA. In March, Checchi told the company he was interested in a friendly acquisition, but that offer was rejected.
Elders is said to be prepared to provide a substantial portion of the financing needed by the Checchi group. However, Elders’ ownership stake in NWA would be restricted to 25% under laws that limit foreign ownership in U.S. airlines.
Checchi, whose office is located two floors above Davis’ in Century City’s Fox Plaza, declined comment. A spokesman for Elders couldn’t be reached.
Meanwhile, some of the airline’s unions are exploring the possibility of making their own bid for the company. According to an official with the Teamsters, which represents the carrier’s 6,500 flight attendants, an investment adviser met with union leaders last Friday to propose an employee buyout.
Pilots Consider Options
The New York Times identified the investment adviser as Kelso & Co., a New York merchant bank specializing in management buyouts that include employee stock ownership plans, and said Northwest’s 4,850-member pilots union also was considering an employee buyout. A spokesman for the pilots wouldn’t confirm its involvement, saying: “We are looking at all the conceivable options, but we are not revealing our strategy now.” A spokesman for Kelso also declined comment.
Jim Connelly, a spokesman for the machinists, Northwest’s largest union group with 11,000 members, said the union wasn’t involved in any employee buyout discussions.
As previously reported, Davis is willing to consider giving Northwest’s employees an ownership stake in the airline. Checchi is also known to be willing to consider that option.
