UAL Directors Chill Any Effort to Revive Bid
UAL Corp.’s non-management directors said Monday that the company should remain independent, ending efforts by an employee-management group to revive its bid for the parent of United Airlines.
The directors, speaking for the entire board, said the group’s failed $300-a-share offer had been in the best interests of shareholders--a statement that suggests the board won’t entertain a lower bid. UAL stock closed Monday at $178.36 a share on the New York Stock Exchange, up $9.88 on speculation about a new bid. The directors’ statement came after the close of trading.
Frederick C. Dubinsky, head of United’s pilot union, said he was disappointed that UAL’s board refused to negotiate a revised bid with the employee group. “Should the board change its views and be willing to discuss a transaction in which employees would obtain a significant majority ownership, we remain willing to participate,” he said.
UAL Chairman Stephen M. Wolf on Monday indicated that his role in the takeover effort was over, at least for now. He said in a statement that he hoped the airline’s workers would “now turn their full attention to operating the best airline in the world.”
United’s flight attendants had no immediate comment on the board’s decision, although its unlikely the attendants would pursue a bid without the pilots. The pilots and flight attendants could try to negotiate an ownership stake in contract negotiations.
The $6.75-billion bid for the nation’s second-largest airline fell apart Oct. 13, when United’s pilots and top managers failed to come up with the financing needed to fund the takeover. The takeover group was dealt another, perhaps fatal, blow last week when its equity partner, British Airways, said it was pulling out of the deal.
The buyout group worked with its advisers over the weekend to come up with a new, lower offer, but it was unable to find a partner willing to replace British Airways’ $750-million equity contribution. The takeover would have created the nation’s largest employee-owned company, with 85% of United’s stock in employee hands.
Though non-management directors, speaking for the entire board, clearly discouraged a sale of the company, they didn’t close the door entirely. In a statement, the board said it intends to explore “all strategic and financial alternatives” to “maximize shareholder value.”
With the employee group in disarray, there was speculation that Los Angeles billionaire Marvin Davis might revive his effort to acquire the airline. Davis’ original $240-a-share bid in August set in motion events that led to the proposed employee buyout.
Sources close to Davis said he was exploring ways to finance a bid. A source close to Davis said it was possible that the failed employee bid “poisoned the well too badly” for anyone to raise cash quickly for another offer. Davis and the employee group share the same banker, Citibank.
Others close to the situation doubted that Davis would make a new offer. “Marvin Davis wasn’t real and isn’t real,” said Brian Freeman, an adviser to United’s machinists union, a group that opposed the employee buyout.
Wolf tried to put the best face on the failed takeover by citing a “substantially improved working relationship” between management and United’s pilots union. Both groups had put aside old antagonisms to work on the buyout effort, and the pilots agreed to a tentative contract that included increased productivity. For example, pilots agreed to fly a Boeing 757 aircraft that had sat idle until the buyout effort got under way.
There was speculation Monday that the failure of the Wolf-led buyout might undermine Wolf’s relationship with employees. The pilots and flight attendants, who joined the buyout group last week, might blame him for the bid’s failure, some said. When told that Wolf thought the takeover experience had strengthened his relationship with employees, Freeman said, “He should be a stand-up comedian.”
