SAN DIEGO — PSA Inc. on Tuesday broke with past practice and offered a portion of its Pacific Southwest Airlines subsidiary to the public, announcing an offering of three million shares of common stock that could raise as much as $24 million.
The offering, which was described as a "positive" move by airline industry analysts, would make available to the public airline common stock that previously had been held only by PSA Inc., the San Diego-based parent company of Pacific Southwest Airlines.
PSA Inc., which has valued the airline common stock at $7.45 per share, anticipates raising between $7.25 and $8.25 per share from the offering.
Proceeds from the offering will be used for "working capital and general corporate purposes," according to PSA spokesman William Hastings.
PSA Inc.'s decision to take its airline subsidiary public was prompted in part by a 1985 labor agreement in which PSA committed to establishing a public market for the airline's stock by the end of this year.
As part of that agreement, airline employees traded wage and benefit reductions for airline stock ownership. PSA Inc. already has set aside 2,655,351 shares--or more than 15% of the airline's stock--for employees.
"When this deal is done, PSA (airline) employees will have the largest shareholder interest of any airline except for Western," according to Jack Curtis, a San Francisco-based lawyer who helped design PSA's labor contract and who later joined the Pacific Southwest Airlines board of directors.
"What they've done is set the airline apart as a separate entity and given it the ability to raise added money for itself," observed Irving Katz, director of research for San Diego Securities. "I'd call it a positive move."
"The extra cash won't hurt because it could help them pay down their debt," suggested David Sylvester, a San Francisco-based industry analyst with the brokerage firm of Janney Montgomery Scott.
"It always helps to have a little bit more money in the till," said another analyst. "But I'd question the timing (of the offering) because PSA's airline operations generated a net loss (of $11.8 million) for the first quarter and I'd suspect they'd be reporting a loss for the second quarter."
PSA Inc. on Tuesday also announced a 3-for-1 stock split that boosted the number of its common shares from 6.4 million to 19.1 million, and increased the number of Series A Preferred shares from 4.5 million to 13.5 million. The Series A Preferred shares are entitled to 10 votes per share while common stock is entitled to one vote per share.
Even after the offering, PSA Inc. would retain control of the airline through its ownership of 74% of the airline's outstanding common stock and all of its preferred stock.
Pacific Southwest Airlines is the principal subsidiary of San Diego-based PSA, which also owns oil and gas, trading and airplane-leasing subsidiaries.