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TWA Board Declines To Take Steps Recommended by Texas Air

August 20, 1985

NEW YORK (AP) _ The board of Trans World Airlines Inc. refused Tuesday to take any of the steps that Texas Air Corp. had sought in support of its battle with financier Carl C. Icahn for control of TWA.

The action was applauded by Icahn, who is TWA’s biggest single shareholder with nearly half the outstanding common stock. He said he was confident he could complete his acquisition by Nov. 30.

Texas Air said it was disappointed by the action, but said the board ″did give very fair consideration to our proposal.″

Bruce Hicks, a spokesman for Texas Air, said the company was assessing the situation before pursuing its bid of $26 a share for TWA - $2 a share higher than Icahn’s offer. But he added that Texas Air was aware ″it would be very difficult to get an approval vote from shareholders″ given Icahn’s huge stake in TWA.

Texas Air had asked the TWA board last week to grant it options to buy TWA’s trans-Atlantic routes or its computerized reservation system called PARS.

″These routes and the PARS system are the heart of TWA, and the board did not want to take any action that could lead to dismemberment of the airline,″ the company said in a statement.

In addition, the TWA board decided against issuing to Texas Air a preferred stock with multiple votes per share, a manuever that would have allowed Texas Air to complete its merger with TWA despite Icahn’s opposition.

The company said the board was uncertain of the legality of such a step, and said it could have been considered to be an inequitable business practice because its sole purpose would have been to neutralize Icahn’s voting power.

The board decided the other steps proposed by Texas Air would not be effective without implementation of either the options to buy TWA assets or the stock issuance, the company said.

Icahn, who has built up his stake in TWA to 45.54 percent, initially bid $18 a share for the airline, but TWA agreed in June to support a merger offer from Texas Air under which Texas Air would have paid $23 a share for TWA.

Icahn later raised his offer to $24 a share in cash and securities and negotiated pay and benefit concessions with TWA’s pilots amd machinists unions to take effect if his offer prevails. Texas Air then increased its bid to $26 a share.

TWA’s stock rose 25 cents a share to close at $22.50 Tuesday on the New York Stock Exchange. Texas Air was unchanged at $19 on the American Stock Exchange.

Last week, Icahn warned in a letter to the TWA board that he ″would be compelled to lower″ his bid if TWA gave Texas Air further concesssions.

He said in the letter that his alliance with TWA’s unions also left him committed to opposing virtually any offer that Texas Air might make for TWA.

The unions have been critical of Texas Air Chairmnan Frank Lorenzo’s past dealings with labor unions.

Texas Air is the Houston-based parent of Continental Airlines and New York Air. Continental scrapped its union contracts and and slashed jobs and wages after filing three years ago for reorganization under federal bankruptcy laws.

In a statement released after Tuesday’s board meeting, Icahn said he was appreciative of the TWA board’s ″responsible actions today, taken in the interests of TWA’s shareholders and employees, the travelling public and the communities served by TWA.″

He said he wanted ″to keep TWA as a great and successful operating airline″ and was confident that his agreements with the pilots and machinists ″ensure that this airline will continue to provide safe, courteous, top- quality service to the travelling public at a reasonable and competitive cost.″

He said he remains confident that he will be able to complete the proposed merger, subject to financing, by Nov. 30.

TWA said Icahn had told the directors that they could permit the Texas Air proposal to be voted on by TWA stockholders and to hold open his own bid for board action until two weeks after the shareholder vote on Texas Air’s bid.

It said Icahn also forwarded a letter from a major commercial bank stating that, subject to further study, it was highly confident of its ability to arrange the necessary financing.

The company said the board felt it was important to have Icahn’s offer available and considers the $24-a-share offer ″an excellent price for our stockholders.″

The company said the decision also was influenced by Icahn’s warning that he might lower his bid, Icahn’s agreements with the TWA unions and the prospect that Icahn’s proposal could be accomplished more quickly than one with Texas Air and is not subject to antitrust review by the federal government.

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