NEW YORK — Carl C. Icahn, the financier who won control of Trans World Airlines Inc. in 1985, today announced a plan to take the company private in a leveraged buyout with an indicated value of $1.2 billion.
Icahn proposed merging TWA with a newly formed company that would pay $20 in cash and debentures with a face value of $20 for each of the roughly 8.1 million TWA shares not currently held by Icahn-controlled entities.
Icahn controls about 73% of TWA's 30 million common shares outstanding. The merger plan would exchange each of his TWA shares for $20 cash and a combination of common stock and a new issue of preferred stock in the newly formed company.
The merger would require approval from regulators, a committee of TWA independent directors and from a majority of shareholders not affiliated with Icahn.
TWA stated that its annual meeting, originally scheduled for Aug. 6, will be rescheduled and that the shareholder vote will take place at the meeting.
After a delayed opening, TWA stock rose $2 to $34.25 on word of Icahn's proposal.
Won Control in '85
Icahn acquired a controlling interest in the airline in 1985 after a bitter takeover fight and tried to cut costs and turn the money-losing carrier into a profitable, efficient enterprise.
Cost-cutting sparked a bitter 10-week strike by TWA's flight attendants in 1986, who rejected proposals for salary and benefit concessions of more than 15%. The company replaced more than 1,600 flight attendants and since then has been engaged in court battles over which former workers must get their jobs back, a bad-faith-bargaining suit brought by the union and whether the newly hired employees must pay union dues.
About 5,100 attendants were out of work when the union called off the strike in May, 1986, and 900 have since been rehired.
The 51-year-old Icahn earned his reputation as a corporate raider and retained control of TWA management in what many observers said might be an attempt to prove that he could lead the airline to profitability.
TWA reported today that it had a second-quarter profit of $52.8 million, or $1.28 per share, contrasted with a loss of $87 million a year earlier. Its revenue rose to $1.06 billion from $741.8 million a year earlier.
Industry Turning Around
The year-earlier results did not include operations of Ozark Air Lines, which TWA acquired in late 1986.
Analysts note that the airline industry as a whole has been turning around after last year's profit-shrinking fare wars and a terrorism-inspired drop in summer travel to Europe. But many also credit Icahn's management for TWA's performance.