UAL Says It Needs More Time to Look at All Its Options

UAL Corp., the parent of United Airlines, Wednesday reviewed a $5.4-billion takeover bid from Los Angeles billionaire Marvin Davis but said it needed more time to consider the offer along with other options for the company’s future.

In a statement, UAL said it intended to “explore all possible financial and strategic alternatives open to the company, including continuing its strategic business plans as an independent, publicly owned company.”

Davis, in a statement, said he was encouraged by the board’s response because it seemed to open the door for discussion. “We look forward to meeting with the company and its representatives as soon as possible,” he said.

Airline industry analysts said UAL’s response appeared to set the stage for an auction of the company to outside investors, other airlines and possibly UAL’s management. “It’s a pretty wide open statement,” said Edward J. Starkman, an analyst with the New York investment firm of Paine Webber Inc. “It’s pretty clear they are not trying to discourage a fully funded bid.”

Davis, the former owner of 20th Century Fox, offered $240 a share for the airline in a letter to UAL’s board last Wednesday. Though he didn’t disclose how he planned to finance the deal, Davis assured UAL money was available.

Pan Am Interested

In his letter, Davis said he was willing to raise his offer if UAL could provide financial information that indicated the airline was worth more money. “Maybe UAL’s response indicates they will allow that,” said a source familiar with Davis’ bid.

Davis may face at least one other serious bidder for the airline. On Wednesday, Pan Am Corp. said it would consider making a friendly offer for the parent of United Airlines.

Pan Am, parent of money-losing Pan American World Airways, has been actively seeking a merger partner. Two months ago, it was outbid by Los Angeles financier Alfred A. Checchi for Northwest Airlines. Davis also tried to buy Northwest.

United Airlines is the nation’s second-largest airline behind American. Besides operating an extensive domestic route system, it owns valuable Pacific routes, including service to Japan. It also owns highly valued landing rights at New York’s LaGuardia Airport and Chicago’s O’Hare International Airport.

The price of UAL shares soared above Davis’ bid Wednesday, apparently indicating that investors expect a higher offer to emerge. UAL shares closed at $243.75, up $24.50, in trading on the New York Stock Exchange.

With the rise in UAL’s shares, analysts said bids for the company would probably approach $300 a share.

Pan Am shares also inched up in heavy trading, amid speculation that the ailing airline might buy a healthy partner. Pan Am shares closed at $4.375, up 12.5 cents, as 2.6 million shares changed hands.

During the last few years, Pan Am has sold off a number of valuable assets--including its Pacific route system to United--to raise cash. It still has nearly $1 billion in debt. Last year, it lost $72 million on $3.6 billion in revenue.

Airline industry analysts say Pan Am would fit well with United. Pan Am has a strong European route system, which United lacks. On the other hand, United’s strong domestic and Pacific route networks would fill a gap in Pan Am’s system.

Another possible bidder was UAL’s management, led by Chairman Stephen M. Wolf. An airline turnaround artist who revived Republic Airlines and Flying Tiger Line, Wolf is admired on Wall Street and is given a good chance of obtaining financing.