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L.A. Investor Wins Northwest Bidding : $4.05-Billion Offer for Airline Defeats Competing Suitors

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From Associated Press

A group led by Los Angeles investor Alfred Checchi would buy Northwest Airlines for $4.05 billion under a deal announced today.

The $121-a-share bid by Checchi’s Wings Holding Inc. defeated at least three other suitors: Pan Am Corp.; the Machinists Union, which represents 20,000 Northwest workers, and Los Angeles oil billionaire Marvin Davis.

The deal is subject to regulatory approval.

The announcement caps a bidding war for NWA Inc., the nation’s fourth-largest airline, that began March 28 when Davis offered $2.7 billion, or $90 a share.

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Stock Climbs $7

On Wall Street, NWA Inc. rose $7 a share to $114.62 1/2 this morning on the New York Stock Exchange.

Checchi’s group, which already owns 4.9% of NWA stock, will pay $3.7 billion for 30.5 million outstanding shares.

The package includes additional equity that would boost the total price to $4.05 billion. The investor group said it is obtaining financing from commercial banks led by Bankers Trust Co.

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Federal regulators are expected to scrutinize the proposal, applying a financial fitness test. The fear is that too much takeover debt could limit a new owner’s ability to maintain equipment.

Takeover debt is also a concern among Northwest pilots, who fear that a highly leveraged acquisition would prompt the sale of routes or other major assets.

NWA Chairman Steven Rothmeier has described Checchi’s group as “very friendly.”

“Our financing plan has been designed to accommodate a program of substantial growth, including all of the new aircraft purchases contemplated by NWA’s management,” said Checchi, 40, a former Marriott Corp. executive.

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Investors in Wings Holdings also include KLM Royal Dutch Airlines.

KLM could never exert control over Northwest because federal regulations limit foreign ownership to a maximum of 25%.

Barbara Beyer of Avmark Inc., an aviation consulting firm in Arlington, Va., has said Northwest and KLM could work together by sharing gates and coordinating schedules for connecting flights. The arrangement would not result in any merger of employees or corporate staff, she said.

H. T. Dodge and Kirk Faupel, leaders of the 5,000-member Air Line Pilots Assn. unit at Northwest, have threatened to strike if the deal approved by NWA’s board involves too much debt.

Pilots’ Power

Pilots wield some power in the takeover battle because they have an open contract. Unless Northwest settles with the union, the new owner would have the task of combining the expired contracts of former Republic Airlines pilots with those of former Northwest Orient pilots. Northwest acquired Republic in 1986.

Besides the four known bidders, two New York takeover firms, Kohlberg Kravis Roberts & Co. and Forstmann Little & Co., were believed to have submitted offers. Both have declined to comment, and NWA has refused to identify the bidders.

Less than a year ago, NWA stock was trading in the range of $40 a share. It increased gradually on takeover rumors and shot into the $100-a-share range shortly after Davis announced March 28 that he would buy the company.

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