Northwest Limits Ownership Over KLM’s Objections
EAGAN, Minn. (AP) _ Northwest Airlines’ board of directors on Thursday approved an anti-takeover defense opposed by its once cozy partner, KLM Royal Dutch Airlines, and went on the offensive to fight a lawsuit filed by KLM.
KLM’s three members of Northwest’s board cast the lone dissenting votes to the poison pill, which would limit any shareholders’ stake to 19 percent and make an unwanted takeover effort too expensive.
The plan freezes KLM’s 19 percent stake in the airline. The U.S. limit on foreign ownership is 25 percent, which KLM had hoped to attain in 1998.
``We fully understand a need for an agreement,″ said KLM president Pieter Bouw. ``The only difficulty we have is that the level is being put at 19 percent. The same level would be effective at 25 percent.″
The Amsterdam-based airline, which has invested about $450 million in Northwest, is suing several Northwest executives, including co-chairmen Al Checchi and Gary Wilson, to keep its stake.
Northwest, which was not named in the lawsuit, announced Thursday the airline will intervene in that lawsuit, bringing its own lawyers to the table for the defendants.
Northwest officials had said the poison pill proposal was the next logical step for the fourth-largest U.S. carrier to protect it against unwanted interests and more control by KLM.
``KLM has an investment in Northwest Airlines and they were attempting to increase that with a series of transactions, we labeled as creeping control,″ said John Dasburg, Northwest president and chief executive.
Dasburg said he saw the need for a shareholders rights plan in 1994, when KLM bought 5.5 million shares from Fosters Brewing Group Ltd. _ one of the airline’s original investors _ over Northwest objections.
``We have explained to them time and time again that KLM has no interest at all to take control of Northwest,″ said Bouw.
KLM, whose six-year relationship with Northwest is the envy of the industry, has an option gained in 1993 to increase its voting interest to 25 percent by buying up more shares.
Dasburg said the board didn’t address that Thursday, but criticized the move as a demand made by KLM in 1993 for the airline’s help in restructuring Northwest to avert bankruptcy.
Brian Harris, an analyst with S.G. Warburg in New York, said the power struggle shouldn’t affect the global alliance between the two.
``Neither of them are going to do something that’s not in their best interests. That would be cutting off their nose to spite their face.″