UAL Stock Sags $15.50, Has Lost 60% of Value

UAL Corp. stock plummeted Tuesday to its lowest level since a $6.8-billion buyout bid collapsed in October, reflecting the growing suspicion that the takeover business is headed for further trauma.

UAL’s stock sank $15.50 to $121 a share on the New York Stock Exchange, a drop of 11% and its lowest since the early summer when takeover speculation began to bubble up for the Chicago-based airline company. The stock has lost nearly 60% of its value after peaking at $294 a share. The employee-led buyout bid was $300 a share.

A UAL spokesman declined comment on the stock move.

Traders said the stock sank for the fourth straight day because some arbitrage houses, suffering heavy losses in the takeover stock market, bailed out of UAL and other deal stocks amid fears about leveraged buyout financing.

“First, there is the fundamental factor of fears about financing and second there is the technical factor of arbs being forced to liquidate,” said one takeover stock analyst who asked not to be identified.

A two-day plunge in some RJR Nabisco high-yield bonds on Friday and Monday has accentuated the financing anxieties, arbitragers said.

The weakness in the securities of RJR, which in 1989 was bought for $25 billion in the largest leveraged buyout ever, has created a perception that banks will be even more fearful of financing takeover deals, arbitragers said.

“It’s a continuation of what we have seen--deals are not getting financed. People are throwing this thing out the window,” said one.

The original $6.8-billion management and pilots buyout offer for UAL collapsed in October when the group failed to secure bank financing. Since then, the stock has swung wildly as traders’ hopes rose and fell that a deal for the company would be resurrected.

But some firms have grown so pessimistic about the prospects for takeover deals that they are forcing the arbitrage departments to prune their holdings, traders said.