Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, April 7, 1990 TAG: 9004070046
SECTION: BUSINESS PAGE: A10 EDITION: METRO
SOURCE: Associated Press
DATELINE: CHICAGO LENGTH: Medium
Union leaders said the agreement calls for the 71,000 employees to give up $2 billion in concessions over five years, including $300 million in the first year and $500 million in the fifth year.
The three union groups that negotiated the $201-a-share deal have not yet secured financing for the buyout, according to a source involved in the talks. The source spoke on condition of anonymity.
Analysts said that weakness could prove fatal.
Lenders also may frown on the unions' plan to dump UAL Corp. Chairman Stephen Wolf, who is perceived as a highly capable airline manager despite his difficult relations with the unions, analysts said.
The stock market reflected investor skepticism. After a strong opening, UAL was down $1.50 a share at $164 in afternoon trading on the New York Stock Exchange.
"The capitulation of the board has been significantly overshadowed by the continuing financing risks," said airline analyst Samuel Buttrick of Kidder Peabody & Co.
Those risks, he said, "make it a very uphill battle from the financing side."
UAL's board announced the tentative agreement after meeting all night at company headquarters near Chicago. The leaders of unions representing United's pilots, machinists and flight attendants gave some additional details at a news conference in New York.
Under the agreement, shareholders would receive $155 in cash, $35 in UAL notes and an estimated $11 worth of securities in UAL subsidiary Covia Corp. for each UAL share.
UAL would spin off to shareholders its 50 percent stake in Covia, which is co-owned by a consortium of five other airlines and operates an automated reservation system.
UAL's largest shareholder, Coniston Partners, immediately called off its threatened proxy fight to oust the board at the April 26 annual shareholders meeting. Coniston has an 11.8 percent stake in UAL and was pressuring the board to sell to the UAL employees.
The company formed by the unions for the takeover is called United Employee Acquisition Corp.
In terms of the number of workers, the largest employee-owned company currently is Publix Inc., a supermarket chain based in Lakeland, Fla., with 50,000 employees, said Corey Rosen, executive director of the National Center for Employee Ownership in Oakland, Calif.
UAL said it expected to conclude a final agreement promptly. But the deal depends on the unions securing financing, and Machinists union Vice President John Peterpaul said the group had several months to put financing together.
"We're very optimistic about the financing," he said.
Under the plan, the unions would sign five-year contracts with no-strike clauses. Other concessions include wage cuts of up to 7.69 percent for flight attendants and Machinists and as much as 11 percent for pilots.
UAL's 25,700 non-union employees would negotiate their work conditions with the union group, said their lawyer, Stephen Fraidin.
The pilots would own 37.9 percent; Machinists 35.7 percent; non-union employees about 14.3 percent; and the Association of Flight Attendants about 12 percent, the union leaders said.
Wolf would be replaced, said Frederick Dubinsky, head of the Air Line Pilots Association union.
"The question is, who is going to manage this thing and take it to the banks?" said analyst Jack Hunter of Howe Barnes Investments Inc. in Chicago.
by CNB