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Offer lifts TWA shares
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November 7, 2000: 4:18 p.m. ET
Global Airlines Corp. says it will make TWA its first deal for $298M cash, stock
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - Shares of Trans World Airlines Inc. climbed Tuesday following announcement of a $298 million cash and stock offer from a privately held company that says it is looking to buy a number of major carriers in the coming year.
But airline analysts questioned the validity of the offer, as well as the long-term prospects for St. Louis-based TWA, the nation's seventh-largest airline.
"I've never heard of them, and I don't give it much credibility," said Ray Neidl, analyst with ING Barings. "I think you're crazy paying anything for TWA."
A spokesman for the proposed buyer, Global Airlines Corp., admitted that there has yet to be a filing with the Securities and Exchange Commission about the offer, although he promised a tender offer soon.
 The offer calls for $1.50 a share in cash, and the rest in a new Global stock, which essentially would be a new version of TWA's stock since Global does not have any current operations. Global estimates that its new publicly traded stock would be worth $2.25 a share. Global said it made the offer Friday evening and again Monday morning and issued a statement on the offer Monday.
That offer was enough to send TWA (TWA: Research, Estimates) shares up 87 cents, or 53 percent, to close at $2.52 a share in trading more than 10 times its average daily volume Tuesday.
"We're been inundated with phone calls from institutions and people in industry who want to get out of TWA," said John Scott, spokesman for Global.
TWA had little comment Tuesday on Global's statement.
"Like all of our competitors, TWA from time to time discusses business transactions with others," said a statement from the airline. "We do not discuss or disclose publicly such conversations until and unless specific agreements have been reached. We are, as always, prepared to consider any legitimate expression of interest by credible parties."
Bidder ready for hostile bid
Global said it would proceed with a tender offer no later than Nov. 30. Scott said the formal filing is waiting for a response from TWA. Scott said that Global made a $5-a-share stock, bond and cash offer for TWA in June, at the time that TWA was reportedly in talks to be acquired by AirTran Airways (AAIR: Research, Estimates), the operator of the discount carrier formerly known as ValuJet. Those talks ended without any deal.
"Half of our team believes the deal should be a friendly deal, half feels we should have tendered an offer nine months ago," said Scott.
 TWA has been losing money steadily for years, even in relatively good times for airline profits. For the first nine months of this year it reported a loss of $102.3 million or $1.50 a share, before special items. That was up from a loss of $80.6 million or $1.47 a share in the same period a year earlier. Analysts surveyed by First Call forecast an additional $1.41-a-share loss in the current fourth quarter, although that would be an improvement from the $1.60 a share it lost in the same period a year earlier. But the analysts also believe it will lose $1.60 a share next year.
Bumpy financial future ahead for TWA
"TWA is an airline that doesn't need to exist. Period," said one analyst who spoke on the condition his name not be used. "If fuel prices keep doing what they're doing, they may not exist. Airlines don't die easy, they keep limping along. But they've sold off most valuable assets and mortgaged everything else including the light bulbs."
The company's most recent balance sheet shows a shareholder deficiency, rather than an equity, of $280.7 million, with liabilities and deferred credits of $2.4 billion outweighing cash and cash equivalents of $157 million, net property of $1.5 billion and other assets of $432 million.
Even the TWA name, one of the oldest in the aviation industry, apparently has little value. Scott said that the company would drop the name in favor of Global should a deal be completed.
TWA was formed from two 1920s-era airlines, one of which operated on routes laid out by Charles Lindbergh. It was acquired by Howard Hughes in 1939, and he controlled it for the next 25 years, changing its name from Transcontinental and Western Air to Trans World Airlines in 1950.
The airline has also been owned and controlled by financier Carl Icahn, who acquired control in 1985, and had to file for bankruptcy court protection for the carrier in 1992 after he took it private. He relinquished control of the carrier in early 1993.
Analysts question bidder's plans
Scott insists that Global would have the resources, and with the new stock, the currency, to acquire other second-tier airlines among the nation's top-10 carriers, although he would not identify other targets except to say at least one has international routes.
"It will become clearer in January as deals starts to unfold that this will become a growth company," he said. "We've had talks with three other airlines. The only reason those offers didn't come to completion is we wanted to get the TWA deal closed first."
But Scott gave no details about the source of funds of the investors in Global. The company does not even yet have a Web site, nor any SEC filings, including the various offers for TWA. Analysts questioned the validity of the offer at this point.
"I don't know who they are, or know anyone who knows who they are," said Jim Higgins of Credit Suisse First Boston. "They don't seem to show anything to back up those offers. I just don't understand the notion they're creating value with this currency that can be used to buy other airlines." 
Click here to send mail to Chris Isidore
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