ST. PAUL, Minn. -- A group led by Los Angeles investor Alfred A. Checchi that has a stake in KLM Royal Dutch Airlines agreed Monday to buy Northwest Airlines for $4 billion, far outstripping a hostile bid by oil and entertainment magnate Marvin Davis.
The definitive agreement between Checchi's Wings Holdings Inc. and NWA Inc., Northwest's parent company, is for $121 a share.
NWA stock climbed $6.375 to $114 a share Monday on the New York Stock Exchange, where it was the third most active issue. When the bidding started nearly three months ago, NWA stock traded in the mid-$60 range.
The move by Checchi, who initially bought 4.9 percent of NWA stock, was far better than one made March 30 by Davis, whose $90-a-share, $2.7 billion bid set off a flurry of interested buyers, including Pan Am Corp. and the machinists union.
In New York, Pan Am Chairman Thomas Plaskett issued a statement saying his company was 'disappointed' that it was not selected as the winning bidder and hoped its proposal would be reconsidered if the Checchi offer did not pan out.
Pan Am's all-cash bid was believed to have been in the $110-a-share range. Pan Am stock lost 50 cents to $3.75 a share on the New York Stock Exchange.
Northwest Chairman Steve Rothmeier said earlier that the Checchi group, which includes Gary Wilson, a former member of the NWA board, was considered a 'friendly' bidder who could be expected to keep the airline on its present course.
Checchi said he will keep the airline based in Minnesota and retain all current hubs.
Wings has received commitments for $700 million of equity as part of its financing arrangements. The remaining $3.35 billion of the financing is expected to be provided by a syndicate of commercial banks led by Bankers Trust Co., the statement said.
Bankers Trust has provided Wings with a commitment to lend $500 million and is highly confident it will be able to syndicate the remainder. The financing does not include any subordinated debt.
Checchi said the $700 million in equity to be invested in the transaction 'demonstrates our commitment to a responsible capital structure that will insure that NWA will continue as a financially sound, growing entity able to meet all of its responsibilties and obligations to its employees, customers, equipment suppliers and the communities that it serves.'
He said the business plan is designed to strengthen the airline and said the group looks forward to working with with labor and management to improve NWA's competitive position in the 1990s.
Equity investors in Wings include Checchi and his associates; KLM Royal Dutch Airlines; Bankers Trust Co.; Richard C. Blum and Associates, a San Francisco merchant banking and investment firm, and Elders Finance Group.
Airline pilots at Northwest have not reached agreement with the carrier on a new contract and talks were scheduled to resume Tuesday. Contracts with the airlines other major unions have been settled.
'We intend to maintain NWA's headquarters in Minnepolis-St. Paul and to retain all of its existing hubs and routes,' Checchi said.
'Our financing plan has been designed to accomodate a program of substantial growth, including all of the new aircraft purchases contemplated by NWA's management.'
'The NWA board of directors has concluded that the Wings offer is fair and in the best interests of NWA's shareholders and recommends that NWA shareholders tender their shares into the Wings offer,' a statement from NWA said.
'Pursuant to the NWA-Wings merger agreement, a Wings subsidiary will commence in the next five days a tender offer to purchase all outstanding NWA shares at a cash price of $121 per share,' the statement said.
'The tender offer will be conditioned upon, among other things, the tender of at least a majority of NWA's shares, the receipt of financing for the transaction, and certain other customary conditions in transactions of this type,' the statement said.
Following successful completion of the Wings offer, any NWA shares not purchased in the offer would be converted into $121 a share in cash in a merger with NWA.
NWA on Monday also introduced its latest purchase, the first Airbus A320 jetliners. Northwest has orders and options for 100 of the 150-seat aircraft, which features a fly-by-wire electronics to operate its flight systems and a joystick instead of a steering wheel.
