Unions Sue; Say Their Buyout Offer Better Than Texas Air’s
MIAMI (AP) _ A group of Eastern Airlines employees on Monday filed a federal lawsuit seeking to block an upcoming meeting at which shareholders are expected to approve a $676 million takeover offer by Texas Air Corp.
The newly formed Eastern Airlines Employee Coalition Acquisition Inc., representing members of the airline’s major labor unions, also said it had obtained financing for a $600 million cash buyout of its own.
The suit, filed in U.S. District Court in Miami, asks for a preliminary injunction against the Nov. 25 shareholders’ meeting, complaining that Eastern’s board of directors had refused to consider a counter buyout offer from employees, who own 25 percent of the company.
Employees charged that the proposed Texas Air merger would ″deny Eastern’s shareholders their fundamental right to approve or disapprove the proposed merger, preclude other potential bidders from competing on a fair and equal basis for control of Eastern...and deny Eastern shareholders the opportunity to obtain adequate consideration for their shares.″
The suit also says the Texas Air proposal was approved hastily without fairness opinions by financial analysts and the Eastern board entered a ″lockup″ agreement that precludes Eastern from soliciting other bids.
Texas Air said in a statement issued in Houston that it had no interest in selling its stake ″and can envison no circumstance where it would be required to do so.″
″The futile plan by the union leaders is without significant financial support and appears to be a folly designed to rouse employee sentiment against the merger in order to divert attention from the job that has to be done,″ the statement said.
The U.S. Department of Transportation approved the merger in September, and Eastern’s board had accepted the offer on Feb. 24.
But Charles Bryan, who sits on the executive committee of the International Association of Machinists, one of Eastern’s three main unions, said the coalition’s $10.25-a-share bid is better than Texas Air’s offer because it was all cash. Texas Air’s bid of $10 a share included only $6.25 in cash and the rest in debentures, he said.
Eastern employees made a similar offer in August, which was rejected by the board in September.
The coalition has refused to disclose its financing arrangements.
Bryan, however, said, ″We have the contracts with investment banking all put together. The contracts are all written, the lawyers are looking them over.″
Eastern’s chief spokesman, Jerry Cosley, brushed aside the employee offer and predicted smooth sailing in Texas Air’s acquisition.
″There’s been no development that would alter Eastern’s firm expectation that the merger will go through as planned with the affirmative vote of shareholders,″ he said.
Monday’s suit was the second by the coalition.
On Friday, it asked the U.S. District Court in Miami to strike Texas Air’s purchase of the 10.9 million shares of Eastern stock, bought in a private offering.
The employee group’s officers include leaders from the Air Line Pilots Association and the Transport Workers Union, Eastern’s other main unions.