NEW YORK — Braniff on Tuesday dropped its proposal to take over major elements of Pan Am Corp. after the Pan Am pilots union apparently decided not to support the offer.
Braniff's takeover proposal had enjoyed the support of Pan Am's board, but sources said Tuesday that the pilots rebuffed the plan, chiefly because of objections to Braniff's plan for obtaining $800 million in wage concessions from Pan Am unions over four years.
Pan Am had given Dallas-based Braniff until Tuesday to submit the labor concessions plan.
Braniff and Pan Am said late Tuesday that they had agreed to terminate a letter of intent for a merger that they signed on Dec. 7.
"It has become clear to us that the transactions contemplated between Braniff and Pan Am in the Dec. 7 letter are not feasible," Peter Connolly, a vice president of Braniff, said in a statement.
"We are confident that both Pan Am and the unions are sincerely seeking solutions to the problems of that company. However, we believe that making a deal in the current situation may require more sacrifices than the various parties are currently prepared to make."
Connolly declined to say whether Braniff had pulled out of the deal because of the rejection by the pilots union. He said Braniff still would consider any suggestions made "by any of the parties," including both Pan Am and the unions.
Pan Am declined to comment on Braniff's announcement, although spokeswoman Pamela Hanlon confirmed that the letter of intent had been terminated. The Pan Am board was scheduled to meet this morning.
Pan Am shares rose 12.5 cents to close at $3.125 a share Tuesday on the New York Stock Exchange. Braniff made its announcement after the close of trading.
Braniff's withdrawal opens the possibility that other suitors may jump into the fray. In recent months, troubled Pan Am has been the target of successive takeover overtures by Anglo-French financier Sir James Goldsmith, West Coast investor Kirk Kerkorian and Braniff.
Another possible suitor, Towers Financial Corp., announced earlier Tuesday that it had enlisted the support of both the pilots union and the Teamsters, two of the five labor unions represented at Pan Am.
Towers, a debt-collection and insurance holding company based in New York, also said it had lined up $350 million in financial backing in addition to the $50 million that it announced several weeks ago, but declined to identify its backers.
The pilots and Teamsters, along with Pan Am's flight attendants and mechanics unions, had formed a coalition that had endorsed the Braniff bid and had negotiated with Braniff Chairman Jay A. Pritzker.
A fifth union representing transport workers has not been included in the talks with Braniff.
The labor group has been trying to find an investor or buyer for Pan American World Airways, the company's troubled main airline subsidiary, for about a year.
The unions, in exchange for the wage concessions, were looking for assurances that Pan Am would be kept intact if acquired by Braniff. That led Braniff to enlarge its initial takeover bid for the company's Pan American World Airways unit to include Pan Am's profitable Northeast shuttle service and its commuter airline. But the pilots union spurned Braniff's revised bid and its labor plan, apparently turning instead to Towers.
Towers has offered Pan Am shareholders a new issue of preferred stock in Towers with a 6% dividend.
In a recent filing with the Securities and Exchange Commission, Towers said it owns about 100,000 Pan Am shares, which were acquired in the open market at prices ranging from $3.50 to $3.75 a share. Pan Am has about 139 million shares outstanding.