Allegis Receives New Offer From United Air Pilots : Package Includes $4 Billion in Cash; Group Says It Can Sell Hilton for $1 Billion

The pilots of United Airlines made a second offer including $4.1 billion in cash for Allegis Corp., the airline’s parent firm, and said they had lined up a buyer for the company’s Hilton International hotel chain for $1 billion.

The pilots proposed a restructuring in which employees would own 80% of United Airlines, current shareholders would get $75 per share and retain 20% equity of United, and the rest of the company--Hilton International, Hertz Rent a Car and Westin Hotels--would be sold.

Two wealthy Englishmen, David and Frederick Barclay, were identified as having offered to pay $1 billion in cash for Hilton International as part of the pilots’ plan. The deal also would guarantee proceeds of at least $800 million for the sale of Hertz.

The pilots’ association and its financial advisers, Salomon Bros. and Lazard Freres & Co., called the plan “demonstrably superior” to a management restructuring proposal that calls for Allegis to keep its various holdings.

Tax Advantages Cited

Among other things, the pilots promised $350 million in wage, pension and productivity savings and said that amount could be higher if other union groups participate. The group also cited tax advantages owing to the airline’s proposed ownership by an employee stock plan.

Allegis officials at their Chicago headquarters said only that they had received the offer and were studying it. An official close to the pilots group said it wasn’t expecting an immediate response.

Allegis, called UAL Inc. until earlier this year, has been the subject of several takeover threats and two proposals in recent weeks, starting with the $4.5-billion offer by the United Airlines Pilots’ Master Executive Council on April 5. Last month, the investment group Coniston Partners said it had acquired 13% of Allegis and would try to take it over, cut it up and sell the pieces.

Management’s Proposal

In response, Allegis management on May 28 unveiled a $3-billion corporate restructuring that included a special payment of $60 a share but would more than double its indebtedness in the process. The New York-based Coniston group said it would pursue its takeover anyway.

The official close to the pilots’ group declined to put a dollar value on their latest, multifaceted offer but said it amounted to “significantly above what the company would propose.”

In a letter to Richard J. Ferris, Allegis’ chairman, chief executive and president, the pilots outlined a plan whereby current owners of the company’s 58 million outstanding shares would receive at least $70 in cash per share plus a new preferred stock in the airline valued at $5 a share. They would also get the after-tax proceeds of the sale of Westin Hotels and retain 20% of the equity in the airline.

The rest of the airline would be owned by an employee stock ownership plan.

The $70 per share would come from proceeds of the Hilton International and Hertz sales and a recapitalization of the airline that would include $850 million from preferred stock purchased by the pilots and $4.4 billion in debt. That would include the assumed debt of United Airlines and new debt.

“Lazard and Salomon have informed us that, based on discussions held to date with banks, they believe that such financing could be obtained in a reasonable period of time,” said Captain F. C. Dubinsky, chairman of the pilots’ association.

Dubinsky said in his letter to Ferris that the aggregate value of the proceeds of the recapitalization and the new preferred stock exceed the pilots’ April offer by about $500 million.

The purported buyers of Hilton International were described as owners of two large United Kingdom breweries, J. W. Cameron & Co. and Tollemache & Cobbold Breweries; operators of luxury hotels in London, New York and Monte Carlo, and owners of 34% of Gulf Resources & Chemical Corp.

In addition to the $1 billion for Hilton International, the pilots said they expect at least $800 million in cash would be distributed to shareholders from the sale of Hertz. If the sale brings less than that, the balance would be made up by more financing or asset sales.

Despite the lack of immediate response from Allegis, company officials were quick to remark that the prices proposed by the pilots for Hilton International and Hertz would appear to undercut the pilots’ own criticism that Allegis had paid too much money for the subsidiaries in the first place.

The Hilton International organization was acquired just five weeks ago for $980 million, only 70% of that in cash, while Allegis bought Hertz in late 1985 for $580 million.