TWA Goes Private Despite Efforts to Fight Icahn Move

NEW YORK — Financier Carl C. Icahn took Trans World Airlines private Monday despite protests by some shareholders and unions that he was looting the carrier for personal enrichment.

In the transaction, TWA bought the shares of all stockholders, a move that will remove the stock from trading on public exchanges. Icahn will end up owning 90% of the company and the remaining 10% will be held by TWA workers through an employee stock option plan.

Icahn consummated the transaction after a ruling late Friday by the Delaware Chancery Court cleared the way. The court denied a request by a group of stockholders, who have sued the airline, for a preliminary injunction to at least delay the going-private transaction.

The class-action suit, which seeks damages, is pending, and at least two other efforts to reverse the privatization are still alive.

Pilots Are Opposed

Icahn, who is TWA’s chairman, won approval for the privatization at a special shareholders meeting last month at which more than 97% of the shareholders voting approved the transaction. The rules of the election kept Icahn, who already owns 77% of the airline’s 30.5 million outstanding shares of common stock, from voting.

TWA’s pilots have also filed suit in New York State Supreme Court in an effort to prevent the privatization. According to Mark Buckstein, TWA’s general counsel, a request for a preliminary injunction was withdrawn by the pilots last week, but the case is expected to go to trial in December. At the trial, the pilots will attempt to undo Monday’s deal.

Also, the TWA flight attendants’ union has petitioned the U.S. Department of Transportation asking that the privatization plan be disallowed. The attendants seek a test of TWA’s financial fitness, charging that Icahn has not left enough money in the airline’s treasury.

However, TWA announced Monday that an Icahn-affiliated company had bought for cash the 20.6 million shares of Texaco common stock that TWA owned. The announcement said TWA will make a profit of about $222 million on the sale before taxes.

Altogether, Buckstein said, the sale will infuse about $900 million into the TWA treasury. “We have plenty of money now,” he added.

Stockholders fighting the privatization maintain that they are not getting enough cash for their shares. Under the deal’s terms, each outstanding share of TWA stock will be exchanged for $20 in cash and $30 face-value worth of 12% bonds that will mature in 20 years. The stock closed Monday at $36.625, up 25 cents on the New York Stock Exchange. The bonds are currently trading at about $18.

Like other common shareholders, Icahn received $20 cash for each share. As he owned about 23 million shares, that amounts to about $469 million.