Twa Boosts Stake Share In Usair Raised To 15%

Posted: March 07, 1987

NEW YORK — Trans World Airlines Inc. yesterday disclosed it had raised its stake in USAir Group Inc. to about 15 percent as part of TWA chairman Carl C. Icahn's $1.5 billion hostile bid for the carrier.

TWA said it might acquire more stock in the open market, in private deals or in a tender offer, subject to federal approval.

The announcement came as rumors swept the stock market that Norfolk Southern Corp., another participant in the airline-takeover maneuvering that has emerged in recent weeks, also wants to buy USAir, for as much as $1.56 billion.

"There's a lot of speculation about who's doing what," said Robert Fornaro, an airline analyst for the New York investment firm Jesup & Lamont Securities Co. "Nothing is surprising anymore."

Securities law requires a filing within 10 days by a purchaser of more than 5 percent of a company's stock, and TWA said it would file with the Securities and Exchange Commission "in a timely manner."

TWA has requested Transportation Department clearance to acquire up to 51 percent of USAir's stock or to merge with it outright. Late yesterday, the agency dismissed TWA's application, saying TWA had not provided the proper documentation.

USAir stock rose $2.375 to close at $50.875, while TWA stock fell 50 cents to $30.50 in yesterday's trading on the New York Stock Exchange.

TWA has offered to buy USAir for $52 a share and threatened a hostile tender offer if the bid were rejected. USAir turned down the bid, calling it ''grossly inadequate," less than a day after it was received.

In a motion filed with the Transportation Department in Washington, USAir called on the agency to reject TWA's filing, which it contended was intended ''to take advantage of a regulatory anomaly that would allow TWA to accomplish in a regulated environment, actions that would be impermissible in the nonregulated economy at large."

TWA said it planned to file a motion disputing the USAir charges.

Separately, TWA said it filed suit in a Delaware Chancery Court seeking to force USAir to dismantle a "poison pill" anti-takeover provision that could make a hostile takeover prohibitively expensive.

Analysts said the provision, which would be triggered if a bidder acquired 20 percent of USAir's stock, would make current shareholders eligible to buy additional shares at a fraction of their market price.

A source with knowledge of the lawsuit said it argues that the provision represents a breach of USAir's duty to shareholders by depriving them of the opportunity to take part in TWA's cash-merger offer.

Icahn, in a letter to USAir chairman Edwin Colodny proposing the merger, conditioned the bid on elimination of the poison pill.

In rejecting TWA's proposal, USAir contended that the offer was an attempt to interfere with its own $1.7 billion acquisition of Piedmont Aviation, which was to have been considered by Piedmont's board the same afternoon TWA made its proposal.

The board adjourned without acting on the USAir deal.

USAir said it would pursue the Piedmont acquisition and that it was continuing negotiations with the Piedmont board.

It also announced Thursday that the federal government gave final approval to its $400 million acquisition of Pacific Southwest Airways, a regional carrier based in California.

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