Investor Group Interested in Continental : Airlines: The son of Texas billionaire H. Ross Perot joins in what may become a bidding war for the ailing carrier.
Shares of Continental Airlines’ parent company rose Tuesday after the bankrupt airline said that a group headed by the son of Texas billionaire H. Ross Perot had become the most recent investors to approach the carrier about a possible takeover.
Some analysts speculated that a bidding war may break out for Continental. They remained skeptical about the success of any attempt to turn around the Houston-based airline.
For the record:
12:00 a.m. Sept. 5, 1991 For the Record
Los Angeles Times Thursday September 5, 1991 Home Edition Business Part D Page 2 Column 5 Financial Desk 1 inches; 33 words Type of Material: Correction
Continental Changes--An article in Tuesday’s editions incorrectly described recent management changes at Continental Airlines. Current Chief Executive Robert R. Ferguson III succeeded Hollis L. Harris, who resigned last month.
“It’s not so much having the money to buy it out of bankruptcy court, but it’s having the money to basically fund losses and carry the company through” for several years, said John Pincavage, a partner in the Transportation Group, an investment firm specializing in the airline industry.
The investment group organized by Perot’s son, H. Ross Perot Jr., may include two foreign airlines and Federal Express Corp., the younger Perot told the Wall Street Journal. However, a Federal Express spokesman said the air cargo giant has never discussed the deal with Perot and has “absolutely no interest” in a stake in Continental.
The two foreign carriers were not identified. U.S. officials at Scandinavian Airlines Systems, which owns 16.8% of Continental, said they have not heard about any possible takeover discussions.
Perot has been involved in efforts to persuade airlines to relocate their maintenance facilities to an industrial airport in Ft. Worth. The airport was developed by the Perot Group, a firm created by his father. The younger Perot was not available for comment.
News of the talks boosted Continental’s shares, which rose 37.5 cents to close at $2.125 on the American Stock Exchange.
Perot is most recent suitor to express an interest in Continental since it filed for bankruptcy protection last December under the weight of enormous debt. Officials from Northwest and USAir airlines have talked to Continental about a possible merger, and Los Angeles investor Marvin Davis has also reportedly expressed an interest.
Besides nearly $1.5 billion in debt, any bidder for Continental would face the prospect of paying for the replacement and renovation of the airline’s aging fleet and the expense of maintaining its busy but money-losing hub in Denver. On top of these woes, Continental has failed to attract enough business travelers, who tend to pay higher fares than leisure passengers.
The cost and effort to turn around Continental is “almost like starting up an airline” from scratch, said Paul Turk at Avmark, a Washington consulting group.
Continental emerged from bankruptcy court once before in 1985 under Frank Lorenzo, the controversial co-founder of Texas Air Corp. who also bought now-defunct Eastern Airlines. But crippling debt payments as well as the detrimental effects of the Gulf War and recession forced Continental back into bankruptcy late last year.
In February, Robert Ferguson, who replaced Lorenzo as chairman of Continental, was ousted after launching a costly effort to upgrade the airline’s image and planes.
