UAL, Coniston Settle Differences; Siege Ends
The embattled parent of United Airlines on Thursday made peace with its largest shareholder, effectively ending a 15-month takeover siege.
UAL Corp. said two principals from shareholder Coniston Partners will join its board. In return, New York money manager Coniston will not sell shares “in any major block” and will not buy shares “to any material extent” for 2 1/2 years.
The surprise agreement prevents Coniston, which owns 11.8% of UAL’s shares, from participating in an unwanted takeover for the nation’s second-largest airline. The pact also protects UAL from such a takeover, since it would be difficult for an outsider--or its unions--to buy the company without Coniston’s support.
UAL Chairman Stephen M. Wolf said the agreement put “the uncertainty about ownership behind us,” allowing UAL to “move forward to focus our full attention on United’s long-term strategic plan and industry opportunities as they arise.”
Wolf struck the deal with Coniston in a meeting in New York on Wednesday. It was approved by UAL’s board Thursday.
Coniston had pressed for a takeover to recover huge paper losses on its UAL investment. It paid an average of $160 each for its shares in UAL, which closed Thursday at $94.75, up $5.
Apparently, Coniston concluded that an effort to take control of UAL might not succeed.
“In consideration of worldwide economic conditions, including the price of oil, working with management and the board will produce the greatest value for shareholders,” said Paul E. Tierney Jr., a Coniston principal who also is joining UAL’s board.
Coniston’ agreement with United is a blow to the airline’s unions. Coniston had supported the unions’ recent attempt to buy the company. When the union bid collapsed last week, the unions said they would nonetheless continue to pursue employee ownership.
A spokeswoman for United’s flight attendants said Wolf had promised to contact the union about the deal but had not yet done so. “We are holding them to their word and reserving comment until then,” said the spokeswoman, Bobbie Pilkington.
F. C. Dubinsky, chairman of the United pilots union, also had no comment.
The unions have open contracts and have said they are looking for “industry leading” raises. They had previously threatened possible strikes if their takeover efforts failed.
Keith Gollust, the other Coniston principal who is joining UAL’s board, said in an interview that the investment firm still believes in employee ownership “in principle.”
However, judging from the fate of the union bid, Gollust said, “it appears the time is not right for employee ownership.”
Asked if he would advocate giving employees a greater say in UAL affairs, he said: “They already have a big say. There is a continuous dialogue between senior management and employees.”
He declined comment when asked if he advocated giving the unions a board seat.
The agreement, announced after the close of the stock market on Thursday, was a surprise. Many on Wall Street expected Coniston to renew its takeover threats after the union buyout failed.
Also, UAL said it intends to repurchase about 9% of its 21.7 million shares to boost shareholder value. There is no requirement for the board to do so, however. The company said the share repurchase plan won’t affect its previously announced plan to allow employees to purchase shares.
