Price of UAL Stock Rises on Hopes for New Buyout Offer

UAL Corp. shares rose Monday on speculation that a new offer for the parent of United Airlines is imminent.

The price of a share climbed $5.50, closing at $179.50 on the New York Stock Exchange on news that UAL’s management plans meetings with employees to discuss “a revised proposal for employee purchase.”

The company would not comment on the structure of the proposal, which is widely expected to include a large ownership stake for employees and a special payment to shareholders. Informed sources have said the deal is expected to be worth about $240 a share.

However, Paul George, United’s vice president for human resources, said in a newsletter to employees Friday that employee ownership faces several hurdles.

“The three most significant,” he said, “are obtaining satisfactory agreements with our unions, receiving a clear and supportive indication from our salaried and management employees that they believe ownership . . . is in their best interest, and obtaining adequate financing to close the acquisition,” he said.

Though United’s pilots actively support employee ownership of UAL, the flight attendants and machinists have not embraced the concept.

United’s flight attendants are involved in difficult contract negotiations with the airline’s management and have threatened to strike. “I believe we are closer to a final confrontation,” union President Patricia Friend said to flight attendants in a letter sent Friday.

Friend and the union’s vice president, Carol Holmes, are resigning effective Jan. 1 to allow new leadership to step in before “the next crisis situation,” Friend said in a telephone interview Monday.

John Peterpaul, general vice president of the International Assn. of Machinists, said that United’s managers haven’t contacted the union to discuss a new proposal. He said talk of a new buyout offer was “all nonsense designed to raise the price of the stock.”

The machinists oppose majority employee ownership at United but have said they might participate in a plan that permits employees to hold a minority stake in the airline company.

The Assn. of Flight Attendants, which represents 14,000 United workers, said its leaders plan to meet with UAL management Wednesday to discuss the buyout plan. United’s management has already met with its pilots.

Friend said she knew none of the details of the proposal.

“They asked for a meeting and we said OK,” she said. Friend described Wednesday’s meeting with United management as preliminary, saying, “I doubt anything will come out of it that will require a membership vote.”

United’s managers and pilots tried to buy the company two months ago with financial help from British Airways. The $6.75-billion, $300-a-share deal collapsed Oct. 13 when banks refused to finance the transaction. The deal would have given a 75% ownership stake to United’s employees, a 10% stake to management and a 15% interest to British Air.

Since then, the pilots and managers have looked for ways to revive the deal, despite several obstacles, including the loss of a major financial backer when British Air withdrew from the transaction.

Opposition from the machinists helped scuttle the first buyout proposal. Lenders were afraid to finance the transaction since it did not have the support of all three of United’s labor groups.

UAL’s management, led by airline Chairman Stephen M. Wolf, is trying to put a buyout proposal together before the company’s board of directors meets next week. Management is under pressure to shape a new offer for the company because Coniston Partners, a New York money manager, said it wants to take control of UAL’s board and put together a transaction that benefits shareholders.

In a filing with the Securities and Exchange Commission that was made public Monday, Coniston said its investment vehicle, Condor Partners, has increased its stake in UAL to 11.8% from 9.7%.

But Coniston indicated that it would not initiate its proposed consent solicitation if UAL makes progress on a transaction that would benefit shareholders. Coniston has said it would seek shareholder approval to oust 13 of UAL’s 15 directors and reduce the number of directors to five.

A similar threat by Coniston in 1987 forced the board of UAL, then named Allegis, to sell the company’s hotel and car rental businesses and to distribute the proceeds to shareholders.