A New York investment partnership that forced an overhaul of UAL Corp. two years ago said Friday that it wants to unseat the board of United Airlines’ parent.
The long-rumored move by Coniston Partners was expected to ignite a second struggle for control of the Chicago-based company that also involves takeover veterans Saul P. Steinberg and Marvin Davis.
Coniston said it owns 9.7% of UAL’s shares, much of it acquired in the last two weeks. The partnership said it wants to gain control of UAL’s board and engineer a sale of the company or some kind of corporate overhaul that increases shareholder value.
The move by Coniston mirrors its actions toward other takeover targets, where it has reaped millions of dollars in profits after taking a large stake and threatening to seize control.
Augustus K. Oliver, a Coniston principal, said in an interview that he believes there is strong shareholder support for Coniston’s plan.
Traders, enthusiastic about Coniston’s action, drove UAL shares up $11.75 on Friday to close at $184.75 on the New York Stock Exchange. “I would say just about everyone is behind them,” said one stock speculator. “No question about it.”
Coniston said it is seeking shareholder approval to reduce the size of UAL’s board from 16 to five, and to remove all UAL’s directors except Chairman Stephen M. Wolf and Frank Olsen, an outside director who is chairman of Hertz Corp. Coniston’s plan calls for Oliver and his two partners, Paul E. Tierney Jr. and Keith R. Gollust, to join UAL’s board.
UAL had no comment Friday on Coniston’s action.
It wasn’t known how UAL’s board would react to Coniston. When Coniston threatened to unseat the board two years ago, UAL--then called Allegis Corp.--underwent a massive overhaul that involved selling its Hertz rental car business and its hotel operations. As part of the overhaul, UAL purchased a large number of its shares, giving Coniston a $460-million bonanza.
The board also fired its former chairman, Richard J. Ferris, and brought in Wolf as his replacement.
Coniston’s newest threat to UAL comes after three months of takeover turmoil that started with a $240-a-share bid from Los Angeles billionaire Davis. An employee-management group led by Wolf topped Davis’ offer, but its unfunded $300-a-share bid fell apart three weeks ago.
The collapse of the Wolf bid sent UAL’s stock price into a tailspin and set the stage for this latest round of takeover activity.
United’s pilots union, which participated in the Wolf bid, has said it is exploring ways to gain control of the airline. The machinists union, which opposed the Wolf bid, said it too is trying to develop alternatives. The machinists have in the past supported changes in the company’s capital structure.
Besides the unions, some prominent takeover experts have expressed interest in UAL. Davis has been seeking union support for a new takeover offer. Though a standstill agreement forbids him from making an offer under $300 a share, he might be allowed to bid if UAL’s directors, under pressure from Coniston, put the company up for sale.
And earlier this week, New York investor Steinberg said he was seeking control of the airline and asked for government permission to buy more than 15% of its shares.
Steinberg, a friend of Wolf, hasn’t commented on his plans, but some investment analysts familiar with UAL don’t expect him to take an active role in a takeover.
Rose Ann Totora, an analyst with Drexel Burnham Lambert in New York, said Steinberg might simply wish to profit from any increase in UAL’s stock price resulting from another round of takeover activity. “That’s how he operates. He’s totally in character.”
Asked whether Steinberg, a veteran of takeover scraps for Walt Disney Co. and Penn Central Corp., might rescue UAL from an unwanted suitor as a white knight, Totora said, “Anything is possible.”
Oliver said Coniston hasn’t had discussions with Steinberg.
Separately, Steinberg said Friday that his company, Reliance Group Holdings, sold its 6.9% stake in UAL during the last three months for a whopping $151.5-million profit. Steinberg doesn’t own any UAL shares currently.
Tierney said he contacted United’s union leaders Thursday night to alert them to Coniston’s plans. In a statement Friday, Coniston said it sought to provide job security to UAL’s workers and to offer them an ownership stake in the company.
“He is saying all the right things,” said John Peterpaul, executive vice president with the International Assn. of Machinists, who talked with Tierney on Thursday night. Peterpaul said a meeting with Coniston is planned for next week.
Peterpaul said he was skeptical about Coniston’s plan to keep Wolf on UAL’s board. The machinists, along with United’s non-union workers, have called on Wolf to resign for his role in the aborted takeover effort. The failed takeover has also hurt Wolf’s image on Wall Street.
Tierney, in an interview, said Wolf’s role in the failed buyout requires more examination. He said he wanted to talk with Wolf and the other participants in the failed takeover attempt “to get a more explicit understanding of the circumstances” that led to its collapse, and Wolf’s “role or culpability in the failed purchase.”
Tierney said Wolf was invited to stay on the board because Coniston admires his skills as an administrator. “He’s done a good job flying the airplanes,” he said. “We would like continuity.”
Coniston has made millions of dollars by buying into companies, pressuring for changes and then walking away with cash. It waged an unsuccessful proxy fight over Gillette Co., pressed for the leveraged buyout of Storer Communications and participated in the merger of Viacom International with National Amusements.
The only company that has agreed to be acquired by Coniston is TW Services, an operator of Hardee’s and Denny’s restaurants. The sale was postponed last week after Coniston was unable to raise $1.15 billion needed to complete the deal.