Pan Am, Davis Beat Deadline for Bids for NWA
The deadline on bids for NWA Inc., the parent of Northwest Airlines, passed Tuesday with Pan Am Corp. and Los Angeles billionaire Marvin Davis making competing offers for the airline.
NWA would make no comment on the bids or on whether any others had been received.
The two known bidders would not disclose the size of their offers. However, Pan Am and oilman Davis, the former owner of 20th Century Fox, have each lined up more than $3 billion in financing.
NWA’s shares closed at $107.25, up $1.25, in trading on the New York Stock Exchange on Tuesday. At that price, NWA would cost $3.2 billion.
NWA, based in Eagan, Minn., has been for sale since late March, when Davis launched a $90-a-share offer for the airline. After rejecting Davis’ offer as inadequate, NWA invited bids for the company but said it would also consider other alternatives to “enhance shareholder value,” such as a special dividend.
NWA said a special committee of four outside directors will review the offers, along with other alternatives for the company’s future. The committee expects to complete its review by June 16.
The auction process could extend beyond mid-June, however, since both Pan Am and Davis refused to sign confidentiality agreements with NWA, freeing them to later launch hostile bids for the company.
Others Attracted
Northwest Airlines is the largest U.S. carrier to points in the North Pacific, including Japan. It is the nation’s fourth-largest airline and owns 232 airliners and valuable real estate in Tokyo. Last year, it earned $135 million on revenue of $5.7 billion.
The airline has attracted a number of suitors interested in acquiring its sizable fleet and important Pacific route system. Los Angeles financier Alfred A. Checchi, who formerly was an executive of Marriott Corp., was known to be considering a bid but could not be reached for comment Tuesday. Checchi’s New York financial adviser, Bankers Trust, declined to comment.
Also said to be interested in NWA was Kohlberg, Kravis, Roberts & Co., a New York investment firm that specializes in leveraged buyouts. A KKR spokesman refused to comment Tuesday.
Details about Davis’ bid were not available, but Davis had previously obtained $3.3 billion in promised financing in connection with his earlier, unsuccessful $2.7-billion bid. His son, John Davis, a Los Angeles film producer who is involved in the NWA bid, said his father’s offer, though larger than his first one, does not involve selling any of NWA’s “strategic assets,” such as aircraft or routes and is not predicated on any layoffs.
John Davis described his father’s bid as “very strong.”
Arranged Financing
Pan Am disclosed some details about its financing arrangements Tuesday. The New York-based parent of Pan American World Airways said it plans to borrow $2.7 billion in temporary financing from a group of five banks, including Bankers Trust. That loan would be replaced after Pan Am’s financial adviser, Prudential-Bache Securities, arranges long-term financing.
Pan Am has also lined-up $400 million in equity financing and has sold an unspecified amount of high-yield, high-risk “junk bonds,” bringing the size of its package to more than $3 billion.
Thomas G. Plaskett, Pan Am’s chairman and chief executive, issued a statement saying a Pan Am merger with NWA would “result in the only truly global U.S. airline company.” Pan Am, which is losing money and has been looking for a merger partner to ensure its survival, contends that NWA’s strong Pacific route system complements Pan Am’s strength in the Atlantic.
