UAL Rejects Employees’ Latest Bid for Buyout, Drops Merger Accord

Directors of UAL Corp. today unanimously rejected a scaled-down buyout bid by United Airlines employees and terminated their merger agreement with the employee group.

A UAL spokesman said the merger agreement was terminated because the employee group--United Employee Acquisition Corp.--failed to arrange financing for the original $4.4-billion, $201-a-share buyout.

The company said that the employee group presented a revised acquisition proposal but that the value was considerably below the $4.4-billion offer the board accepted in April.

The employees last week had been trying to put together a deal believed to value the Chicago-based company at $165 to $175 a share, or $3.6 billion to $3.8 billion.

“We firmly believe that the interests of both UAL shareholders and employees would be well served by the company aggressively moving forward with its highly successful strategic plan and taking advantage of its position of strength in a time of difficulty for the airline industry,” the board said in a statement.

The board, facing potential labor problems with its three unions as a result of the buyout’s failure, asked federal mediators to resume talks on new contracts for pilots and flight attendants.

Directors also said UAL is prepared to resume negotiations with the International Assn. of Machinists.

All three unions have been working under expired contracts while pursuing the buyout--which would have made UAL the world’s largest employee-owned company.