Trump in Surprise $7-Billion Offer for American Airlines
New York developer Donald Trump today made an unsolicited $7-billion proposal to acquire AMR Corp., the parent of American Airlines, AMR announced.
A buyout at the price proposed by Trump, if actually completed, would be the biggest airline purchase ever.
American spokesman Al Becker said the company had received a “unilateral unsolicited letter” proposing a $120 a share buyout by Trump, who bought Eastern Airlines’ Northeast shuttle service in March for $365 million.
After an initial trading delay, AMR stock opened at $107 a share on the New York Stock Exchange, up sharply from its Wednesday close of $82.75. The shares had settled back to $102.50 by around midday.
“Given the cast of characters, the lack of information right now, I feel like (Trump’s) got a tough row to hoe,” said Kevin Burke, who follows the airline industry for First Union Corp., a bank holding company in Charlotte, N.C.
Burke said the $120 offer was at the high end of analysts’ estimates of AMR’s worth. It also came as a surprise, “especially since it was his opening salvo, so to speak. You would think he would have a few ducks in reserve,” he said.
With 58.9 million outstanding common shares of AMR stock, a $120-a-share offer would be worth more than $7 billion.
The biggest airline buyout ever was an investor group’s $3.65-billion purchase of NWA Inc., parent of Northwest Airlines, earlier this year. A group led by United Airlines pilots and senior management has offered to buy that carrier’s parent, UAL Corp., for $6.75 billion but the proposal remains pending.
Focus of Attention
AMR has been the focus of heated takeover speculation recently and last week it asked the Securities and Exchange Commission to investigate financial wire reports about takeover rumors.
Trump’s letter stated that his offer was “subject to the execution of a mutually satisfactory definitive acquisition agreement,” and that Trump believes that “the financing necessary for the proposed transaction will be obtained within a reasonable period of time.”
AMR’s board of directors will consider Trump’s offer “in due course,” Becker said from AMR headquarters in Ft. Worth.
Becker stated there has been no change in AMR’s policy “that AMR and its shareholders will be best served by AMR remaining an independent company and continuing the strong partnership among American Airlines, its employees, the communities it serves, and the public--a partnership that has given AMR the great success it enjoys today.”
AMR also stated that it continues to believe that excess levels of debt in the airline industry are not in the public interest.
Stock Takes 12% Jump
In August, AMR stock jumped 12% as reports circulated that the company had retained two investment firms to help defend against any takeover.
News reports said AMR has retained Salomon Brothers Inc. and Goldman Sachs & Co. to advise the Ft. Worth-based company, but AMR would neither confirm nor deny the report.
