UAL’s Stock Soars $8 on Analyst’s ‘Buy’ Advice : Airlines: The suggestion, based on a belief that an employee buyout will succeed, comes amid rumors of Marvin Davis’ renewed interest.
The stock price of UAL Corp. rose sharply Friday on the strength of an analyst’s “buy” recommendation--based on his belief that the employees’ effort to buy the company will succeed--and in response to rumors, so far unsupported, that Los Angeles investor Marvin Davis has a renewed interest in taking over UAL.
The stock was up $8 at $100.25.
Analyst Paul H. Nisbet of Prudential-Bache Securities, a New York brokerage house, said in a report sent to clients Thursday: “We expect an LBO (leveraged buyout) deal for UAL by October. Too many parties’ oxen would be gored if one is not. We reiterate our buy recommendation.”
Nisbet said in a telephone interview Friday that he had been recommending UAL stock, parent of United Airlines, since April because he expects the proposed $4.38-billion deal to succeed. He acknowledged, “I don’t believe that any other analysts are saying the same thing.”
Rumors of Davis’ renewed interest in UAL resulted from the sale earlier this week of Pebble Beach Co. by the Denver-based real estate partnership of Miller, Klutznick, Davis & Gray Co. to Japanese developer Minoru Isutani. The rumors grew out of a belief that Davis, the best-known member of the partnership, would now seek a place to invest his part of the proceeds. The sale was reportedly for $800 million to $1 billion, giving Davis much liquidity.
Davis, who could not be reached for comment Friday, made a bid for UAL last year. A spokeswoman for the United Employees Acquisition Corp., the labor group seeking to buy UAL, declined to comment on the stock price rise. Last month, UAL’s unions were given an additional 60 days--until Oct. 9--to arrange financing for the deal.
In his report to clients, Nisbet said the market “has all but given up on the chances for a successful leveraged buyout of UAL Corp. by the company’s employees, if the current stock price is any criteria. We believe, however, that an LBO deal, perhaps one constructed more conservatively than the current one, will be consummated by October--if there is no shooting war in the Middle East.”
One arbitrager, who asked not to be identified, said UAL stock rose so sharply Friday because it had been “oversold” by people who did not expect the union’s buyout plan to succeed.
Sharon Kalin, another arbitrager who is president of Athene-Coronado Management in New York, scoffed at the idea that Davis would have a chance of acquiring UAL. The unions don’t want any “corporate raider” to head the company, she said, adding that the airline union members “had their fill with Frank Lorenzo.”
Lorenzo, former chairman of Eastern Airlines, was accused by labor unions of unfair labor practices that, they claimed, ruined the now-bankrupt airline.
