All Airline Stocks Take Off After Davis Bids for United : Unwanted Offer Worth $4.3 Billion
The parent company of United Airlines said today that it has received an unwanted takeover offer from billionaire Los Angeles investor Marvin Davis, sending the price of the stock soaring and pushing other airline issues higher.
UAL Corp. described the bid only as “highly conditional,” but a Wall Street source said the Davis offer was worth more than $200 a share, putting a $4.3-billion price on the Chicago-based parent of United, the No.-2 domestic carrier after American.
UAL shares jumped $34.125 to $198.625 after a delayed opening on the New York Stock Exchange, lifting the transportation index 62.41 points to 1,312.41, the biggest one-day gain in history for the index.
Ripple Effect
UAL’s run-up had a ripple effect on other airline shares. AMR Corp. was up $1.875 at $69.875, USAir Group Inc. rose 87.5 cents to $52.875 and Delta Airlines Inc. was up $1.625 at $73.75.
“While the board of directors has not decided whether a sale of the company is in the best interest of the company’s shareholders and other constituencies, in keeping with its fiduciary duty, the board will give careful consideration to Mr. Davis’ proposal,” UAL Chairman Stephen Wolf said in a statement.
UAL said its board will meet Wednesday on the offer from Davis, the former oil wildcatter who was spurned in June by NWA Inc., which owns Northwest Airlines and was recently taken private.
The $3.65-billion buyout of NWA by a group led by Los Angeles investor Alfred Checchi has ignited interest in other airline stocks as speculators bet on the next takeover target in the group.
Stock Rises
UAL, often mentioned as a possible takeover target, has seen its stock rise from about $117 a share in mid-June, when NWA agreed to be acquired by the Checchi group, to near $190 last month. But it had fallen back recently as a bid for United did not emerge.
Analysts said the stock was worth more than the current price on Wall Street. “We value it at $250 a share,” Shearson Lehman Hutton Inc. analyst Helane Becker said.
“I am leaning toward $335 a share, but that is somewhat speculative,” said bond analyst Raymond Neidle of Dillon Read.
Davis is believed to hold less than 5% of UAL.
Saul Steinberg, a New York investor, holds a 6.9% stake in UAL, and Texas investor Robert Bass is said to have bought a 2% to 3% interest.
UAL has faced turbulent skies in the last two years. In 1987, it changed its name to Allegis Corp. to reflect a strategy of linking its hotel, car rental and airline businesses.
But the strategy never took off and the company restructured, returning to its original name and selling off its non-airline operations for $3.7 billion to avoid a takeover threat from New York investors Coniston Partners.
In addition, the offer comes at a time when the airline is experiencing other troubles. In July, United had its second fatal accident in six months when a DC-10 crash-landed in Sioux City, Iowa, killing 111 of the 296 passengers and crew aboard.
