NWA Says It Has Found Several White Knights : Up to 4 ‘Friendly’ Suitors Approach Airline, May Counter Davis’ Hostile Bid

The high-stakes battle over Northwest Airlines warmed up Thursday when the carrier disclosed that it has been approached by up to four investors seeking a “friendly” takeover in contrast to the hostile bid by Los Angeles investor Marvin Davis.

Chairman and Chief Executive Steven G. Rothmeier declined to identify the possible friendly bidders for NWA Inc., the parent of Northwest. But one is apparently another Los Angeles investor, Alfred A. Checchi, who leads a shareholder group that includes the powerful Australian conglomerate Elders IXL.

Rothmeier said Checchi, who approached the company about a friendly takeover in February, “expressed interest in being a white knight,” or rescuing the company from a Davis takeover. He described Checchi’s initial contact with NWA as “totally friendly” and “very gentlemanly.”

Checchi wouldn’t comment on Thursday. In the past, he has declined to comment on NWA.

Speculation by well-connected observers on other possible friendly bidders focused Thursday on Kohlberg, Kravis & Roberts and Forstmann, Little & Co., two New York investment firms that specialize in leveraged buyouts, as well as Revlon, which is owned by investor Ronald O. Perelman.

Davis’ takeover plans were further complicated Thursday when Minnesota officials barred him from purchasing shares from Minnesota residents under his $90-a-share tender offer. State Commerce Commissioner Michael A. Hatch said Davis needed to provide more financial details about his plans for NWA, the state’s biggest employer.

Advisers to the Los Angeles billionaire had contended that such a suspension would have little effect on Davis’ plans because not enough shares are held by Minnesota residents to derail his bid.

Labor Talks Cited

But the suspension appeared to have stirred concern in the Davis camp, which issued a statement late Thursday that it will challenge the suspension in federal court immediately. It called the state’s action a disservice to the airline’s hometown shareholders.

The Minnesota law under which the suspension was ordered was upheld in a 1984 case by a federal appeals court.

In a press conference Thursday at NWA’s headquarters in suburban Minneapolis, Rothmeier said two of the would-be friendly bidders told him they wouldn’t proceed unless NWA settled its long and delicate contract negotiations with its pilots. So far, pilots and management remain far apart, and talks are further complicated by unresolved seniority issues that stem from the 1985 merger of Republic Airlines into Northwest.

The labor-management split may have worsened last week when Rothmeier sent overnight letters to each of Northwest’s 5,000 pilots, urging speedy negotiations. The letters angered union leaders, who criticized Rothmeier for going around them.

Rothmeier said NWA’s board was exploring a number of alternatives to the Davis offer. He said one alternative, a management buyout, isn’t under “active” consideration but hasn’t been ruled out.

Rothmeier also said NWA might avoid an unwanted takeover by acquiring an airline or an “aviation-related” company. Frequently mentioned as possible acquisitions for NWA are Alaska, Pan American and Eastern airlines.

NWA’s board planned to review its alternatives “as expeditiously as possible,” the chief executive said. Though he doubted that the review would be completed by May 15, the date of NWA’s annual meeting, he said “it certainly won’t last into summer or fall.”

Snag in Another Plan

Rothmeier said confidentiality agreements had been mailed to investors interested in acquiring NWA. Investors who sign the agreement will be allowed to see secret financial information in a “data room” that is being set up at NWA headquarters.

Rothmeier said he hadn’t been contacted by Kelso & Co., a New York merchant bank that was said to be working to arrange an employee buyout. Observers said that effort may have run into difficulty because NWA’s largest union, the machinists, chose not to participate.

Rothmeier said he preferred that NWA remain independent and that any alternative to independence involved “more debt and more risk” to the airline. The degree of risk, he said, would depend on how much new debt NWA took on.

NWA is fending off several hostile attacks by Davis, who made his fortune in oil and real estate. Besides launching his $2.7-billion tender offer for NWA shares, Davis is waging a proxy fight to unseat NWA’s directors and replace them with his own slate.

Reiterating NWA’s public position, Rothmeier predicted that Davis would lose his proxy fight because “his offer has no financing and is so highly conditional that I don’t think he has a lot of influence with shareholders.”

Noting that Davis plans to borrow $2.4 billion to make the acquisition, Rothmeier said: “I know he cannot avoid selling off part of the assets. . . . I’m not too sure he can prevent layoffs.”

Davis has pledged that he wouldn’t let workers go, or sell airliners or routes. A legal adviser to Davis said Thursday that Rothmeier’s analysis was “dead wrong.”

“There will be absolutely no layoffs,” said George A. Vandeman, a partner with Latham & Watkins in Los Angeles. “In no way do we contemplate layoffs or selling assets.”

Vandeman said the success of Davis’ proxy fight depends on whether the NWA board decides to sell the company. “If the board continues to pursue non-sale alternatives, we stand a very good chance of success,” he said.

Rothmeier said he hasn’t been surprised by any of Davis’ tactics to acquire control of NWA. He said NWA executives noticed increased activity in its stock last fall. Last month, trading of NWA shares accelerated, and the board decided to disclose the Checchi overture and adopt a “poison pill” anti-takeover defense to “flush out whoever was acquiring the stock.”

Following those actions, Davis announced that he owned 3% of NWA’s shares and stated his intention to acquire the company.