UAL wants USAir only if deal boosts stock And a bidding war is ruled out

CHICAGO — CHICAGO -- UAL Corp. Chairman and Chief Executive Gerald Greenwald said yesterday that his company will buy USAir only if he can assure employees that their shares will be worth more after the acquisition.

"If I can't say that and believe it and explain it, then I don't want to do this deal," Mr. Greenwald said.


Mr. Greenwald also ruled out entering into a bidding war for USAir, the largest carrier at Baltimore-Washington International Airport. "I'm not concerned [about a bidding war] because I'm not getting into one," he said.

Mr. Greenwald made his remarks during a break in a meeting with security analysts. In addition to enhancing the value of employees' shares, he said, an acquisition would have to maintain employee ownership at 55 percent of the company and not impede the company's return to an investment-grade credit rating, among other things.


"We are trying to come up with a way to answer" those criteria, Mr. Greenwald said. "If we can't, we are going to stop. If we can, we'll go forward."

Some analysts attending the meeting came away believing that UAL might make an offer for USAir, but one so loaded with conditions that a transaction won't be completed.

"There is less than a 50 percent chance" of a USAir acquisition by UAL, said Bill Mastoris, director of research at Mendham Capital Group.

"There will be a substantial list of conditions," Mr. Mastoris said. "He [Mr. Greenwald] doesn't care if they walk away, but he will not overpay."

Smith Barney analyst Helane Becker agreed.

"The only thing they said [at the meeting] is that they'd do it if a lot of different conditions were met," she said. "They are going to condition it, making [a purchase] hard to complete."

Although industry observers have suggested that UAL might forsake an outright acquisition for a marketing agreement, Mr. Greenwald said he doesn't think USAir would agree to that.

"I don't know that they would want to consider anything else" but an acquisition, he said.


Arlington, Va.-based USAir said in early October that it was in talks with UAL, the parent of United Airlines, and AMR Corp., the parent of American Airlines, about possible alliances that include an outright acquisition.

At that time, UAL and its financial adviser, Merrill Lynch & Co., commenced a five-week study that was to be completed Sunday. The Chicago-based airline is meeting with its unions this week to disclose the findings of that study and is holding a special board meeting on Monday, where it will try to reach a decision on whether to proceed.

Mr. Greenwald said he believes that USAir, the dominant airline in the Northeast, would provide UAL with a lucrative new territory and improve its access to Europe.

He said an acquisition would have to bring USAir's employees into UAL's employee stock ownership plan, which already includes its pilots' and machinists' unions, as well as salaried and management workers.

"It seems logical that [USAir] employees would come into the company at our pay level," Mr. Greenwald said. "It would be lower, but they would get some stock ownership." That is what USAir's unions were looking for at their own airline when 16 months of negotiations ended in a stalemate last July.

Mr. Greenwald said a complicated formula would allow USAir's employees to join UAL's employee ownership plan, without boosting their shares beyond the 55 percent maximum.