Checchi’s Backers Will Get About 20% of Northwest
The Dutch airline and Australian brewer backing Alfred A. Checchi’s $4.05-billion bid for Northwest Airlines will own nearly 20% of the airline after the acquisition.
The disclosures came Friday as Checchi launched his friendly $121-a-share tender offer for NWA, parent of Eagan, Minn.-based Northwest.
A spokeswoman for Checchi said KLM Royal Dutch Airlines will own 4.9% of Northwest’s shares, and Australian conglomerate Elders IXL will own 14.9%. The stake shared by KLM and Elders seems to comply with federal rules that restrict foreign ownership to 25%.
It is assumed that Checchi, a Los Angeles investor and former Marriott Corp. executive, will control the company. As previously reported, KLM and Elders are contributing $480 million in equity, mostly in prefered stock. Checchi and two partners, Gary L. Wilson and Frederic V. Malek, are contributing $40 million.
Checchi, Malek and V. A. Ravindran, managing director of Elders Finance Group Ltd., will join the airline’s 10-member board, which is also expected to include a KLM representative. Other directors weren’t named in tender offer documents.
Checchi wasn’t available to comment Friday, but earlier this week he said he intends to play an active role at Northwest. He said he expects to devote 75% to 80% of his time to Northwest and is looking for a home in the Minneapolis area.
Checchi also said he plans to retain Northwest’s executives and offer them a small stake in the company. That may put him at odds with the airline’s flight attendants, who want Steven G. Rothmeier to resign as Northwest’s chief executive.
$20-Million Profit
In the interview, Checchi said Northwest would lose money in the first two years after the merger, although its cash flow would be large enough to cover interest costs, estimated at $430 million. Without the merger, Northwest would have earned $245 million this year and $262.5 million in 1990, according to the offering documents.
The documents indicate that Checchi’s group sold most of its NWA stake after an unsolicited $2.7-billion offer from oilman Marvin Davis drove up the price of NWA’s shares. Since the end of March, Checchi and his partners reduced their stake to 1.9% from 4.9%, for a profit of at least $20 million.
Since he won the three-month auction for Northwest on Monday, Checchi has traveled to New York, Washington and Minneapolis to nail down financing and win support from employees and government officials. He met with Transportation Secretary Samuel K. Skinner on Wednesday but obtained no commitments.
