How Did Carl Icahn Borrow Money For Twa
ICAHN GETS CONTROL OF T.W.A.
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August 24, 1985
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Carl C. Icahn, the New York investor, won one of the largest prizes in corporate takeover history yesterday when he increased his stake in Trans World Airlines to 50.3 percent, assuring him of control of the nation'south fourth-largest carrier.
Ane of the last barriers that could accept delayed the takeover was obviously removed yesterday, according to sources close to the negotiations. They said that Mr. Icahn'south rival, the Texas Air Corporation, would withdraw its merger agreement made with the T.Due west.A. board.
The sources cautioned that the withdrawal accord, which would speed up the takeover, had not been put in writing yet and had non been signed by Mr. Icahn and Frank Lorenzo, the president of Texas Air.
The developments terminate Mr. Lorenzo'south ambitious plan to merge Continental Airlines and New York Air, both subsidiaries of Texas Air, with T.W.A. to form the nation's 2d-largest carrier; United Airlines is ranked first.
New Function for Icahn
Meanwhile, Mr. Icahn, who in the past has turned a quick profit by shrinking or liquidating companies he has taken over, at present finds himself in a new role as the possessor of a major visitor. He has said repeatedly that he wants to strengthen the airline and has promised two T.W.A unions that he will sell off assets only as a concluding resort to cover big losses.
The biting two-month battle gear up a precedent as unions played a decisive role in determining the winner.
Mr. Icahn worked out agreements with the Air Line Pilots Association and the International Clan of Machinists and Aerospace Workers under which they granted major concessions in wages and benefits. That understanding was one of Mr. Icahn's most powerful weapons in persuading the 18 directors on Wed to give his bid of $24 a chance.
Gene Keilin, a full general partner at Lazard Freres & Company, who is advising the pilots' union and the flight attendants' marriage in the takeover, said in an interview, ''I don't know of some other instance when workers have decided who would own a company.'' He added, ''There have been cases when workers have decided to own companies themselves but never where they decided that it was this man or that human being.''
Texas Air Program Rejected
The board as well voted unanimously to reject proposals made by Texas Air, which had raised its original $23-a-share bid to $26, that would have prevented Mr. Icahn from gaining command.
Union leaders also warned the board that their members would strike if the airline was put in the hands of Mr. Lorenzo, who repudiated union contracts when he took Continental Airlines under the protection of the bankruptcy laws in September 1983.
Mr. Icahn reported yesterday to the Securities and Exchange Commission that he and his partners now own 17.5 million shares of T.Westward.A. The shares were acquired with Mr. Icahn's own money and funds borrowed from banks. Mr. Icahn could not be reached for comment yesterday.
Union leaders and Wall Street directorate said that Mr. Icahn was jubilant on Wednesday when he heard that the lath had unanimously decided to plow down Mr. Lorenzo'south plan to cease his bid.
1 recalled that he put on the black uniform jacket with gold stripes of Capt. Harry R. Hoglander, the leader of the pilots' wedlock, and while making a victory sign with both hands he shouted in his office: ''We've got ourselves an airline. We've got ourselves an airline.''
'We Beat Lorenzo'
Mr. Hoglander, the chairman of the Primary Executive Council of the pilots' wedlock at T.W.A., said in an interview yesterday: ''Nosotros beat Lorenzo. That was the whole object - preserving the union on the holding and pushing back Lorenzo. Nosotros've accomplished both.''
After a Texas Air withdrawal of its proposal, the T.Due west.A. lath has 2 weeks to approve Mr. Icahn's offer of $24 a share for the remaining shares. The airline will then postal service proxies and call a shareholders meeting, probably for the terminate of October.
Since Mr. Icahn owns so much of the stock, approval of his plans is assured.
Under the withdrawal agreement, Texas Air and its investment broker, Drexel Burnham Lambert Inc., would share about $42 meg. 1 source said that the withdrawal agreement would give Texas Air some payments more quickly than if it had not withdrawn.
The money would come from an $xviii million fee from T.W.A. for breaking its merger agreement with Texas Air, likewise as profits from Texas Air's option to buy 6.4 million shares at $19.625 each and profits on 2.2 1000000 shares it already owns.
Mr. Icahn has said in a filing with the South.E.C. that he will appoint a three-member board to run T.W.A., the largest international airline serving the Due north Atlantic.
He does not plan to run T.Due west.A., which would get the largest privately owned carrier in the nation. He probably will keep executives such as Richard D. Pearson, executive vice president and chief operating officer, to manage the airline.
He also told the board that with the present trend of consolidation among major carriers, T.West.A. could eventually merge with or be acquired by another airline.
Source: https://www.nytimes.com/1985/08/24/business/icahn-gets-control-of-twa.html
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