United, Unions Agree on Revised Buyout Pact

From Times Staff and Wire Reports

United Airlines and two of its unions announced an agreement Sunday to revise a buyout accord under which the airline's employees will become majority owners of the company.

Under the agreement, members of the Air Line Pilots Assn., the International Assn. of Machinists and salaried and management employee groups get a new formula for ensuring the longer-term value of their more than $4.5 billion in wages, benefits and work-rule concessions.

Shareholders will be guaranteed a certain amount for their stock through an underwriting financed by UAL Corp., the holding company for the airline.

Adjustments related to UAL's employee stock ownership plan will also be made.

The deal was designed to smooth over discontent that emerged when the price of the company's stock plummeted in recent weeks amid turmoil in the stock and bond markets. The stock, which hit a 52-week low of $117.75 a share on May 16, closed Friday at $119.375.

The deal, which must be approved by the Securities and Exchange Commission, is expected to be presented to shareholders for a vote next month.

After the deal is approved and all existing shares of UAL are tendered, a new stock will be created. Under the plan reached Sunday, unions will get a 55% share in the company instead of a 53% share in the original proposal. The unions will be able to increase the stake up to 63% if the "new" UAL stock reaches $74.55 within a year instead of $89.22 under the original proposal.

"These changes work for our shareholders and will help ensure that United becomes competitive in the aviation marketplace," said Steven Wolf, United's chairman and chief executive.

The agreement was reached during a two-day meeting this weekend between pilots and United executives in Chicago.

"We are enthusiastic and eager to proceed with closing the transaction promptly," said Capt. Roger Hall, head of United's airline pilots group.

The last-minute maneuvering is the latest twist in a deal that is expected to make United the nation's largest employee-owned company and the first of its size to take that step while in relatively healthy financial condition.

United's drive toward employee ownership was slowed when its stock dropped below a level at which unions, by some interpretations, had the option of walking away from the deal. The declining stock price gave new ammunition to dissidents within the pilots union who had fought the deal from the start.

The pilots union leadership went back to the company a week ago seeking an adjustment in some financial conditions to insure the employee stake.

The company, meanwhile, was concerned about the erosion in the return for shareholders under the original agreement, which had called for shareholders to receive a mix of cash, debt and preferred stock totaling $88 a share. With the decline in the bond market, that $88 had been eroded.

Generally, the buyout calls for the pilots and machinists unions to trade $4.9 billion in wage and work-rule concessions for majority ownership of UAL.

Until Sunday's announcement, the deal had seemed uncertain.

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