A possible airline merger came a step closer Friday after Pan Am Corp.'s board of directors said it would like to accept a $375 million takeover offer from Trans World Airlines Inc.
"We believe the proposal contained in your letter could form the basis of a combination that would be advantageous to our shareholders, employees and other constituencies," Pan Am Chairman Thomas Plaskett wrote in an enthusiastic letter to TWA Chairman Carl Icahn.
But Plaskett expressed concerns about financing.
"It would be futile to enter into a transaction without any provision for bridge financing," Plaskett said, referring to the money the carrier badly needs short term.
A marriage of TWA and Pan Am would combine two of the U.S. airline industry's weakest carriers and would mark the end of independence by Pan Am, which pioneered overseas air travel but has lost staggering amounts of money over the past decade. It has survived by selling pieces of itself.
Earlier this year, for example, it agreed to sell prized London routes and some other assets to United Airlines for $400 million.
Icahn said he might consider debtor-in-possession financing, which generally is used by companies that have filed for Chapter 11 bankruptcy protection.
TWA made its offer to buy Pan Am last Sunday. New York-based Pan Am had until Friday to respond to the TWA offer.
Plaskett said any deal should be reached quickly.
Icahn has said TWA was bidding for Pan Am to create a big enough carrier to compete against its growing competitors, AMR Corp.'s American Airlines and UAL Corp.'s United Airlines.
Icahn said Pan Am's announcement out by TWA
Friday was positive enough to continue the discussions.
Plaskett said Pan Am needs the short-term financing to cover its needs over a period that will coincide with a time of low traffic. He also said the money will be needed to help obtain regulatory and shareholder approvals for the deal.
TWA proposed to pay $1.50 cash and $1 in preferred stock or promissory notes for each of Pan Am's 150 million outstanding shares.
Pan Am pilots' association said they were prepared to discuss the offer with Icahn and TWA pilots.