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Group Acquires Braniff in Buyout; Appoints Former Piedmont Executives

June 26, 1988

DALLAS (AP) _ A group led by the investment bank Paine Webber Group Inc. said Saturday it agreed to acquire Braniff Inc. in a leveraged buyout that valued the money- losing airline at $111 million.

The investor group, BIA Acquisitions, also appointed five top executives who resigned from Piedmont Airlines Friday to manage Braniff.

″We intend for Braniff to become a strong competitive force in our nation’s air travel and hospitality industries,″ Jeffrey R. Chodorow, a BIA official, said in a statement.

BIA did not elaborate on its plans for Braniff and officials in the investor group could not be reached for comment. But in recent weeks, the group has pledged to expand the Dallas-based airline and protect the jobs of its employees.

Braniff - once the country’s eighth-largest carrier before it declared bankruptcy in 1982 and laid off thousands of workers - employs 1,300 people in Dallas and 2,600 total.

BIA agreed to buy Braniff from Dalfort Aviation Inc., which is owned by the Pritzker family of Chicago. BIA is paying $7 a share in cash and a pro rata share of 20 percent of the restructured airline for each share of Braniff common stock.

The agreement capped two weeks of negotiations between Dalfort and BIA. Dalfort turned down a previous offer from the investor group about four months ago.

William G. McGee will take over as chairman, chief executive and president of Braniff. McGee was chairman and chief executive of Piedmont and helped build that airline into the nation’s ninth-largest carrier, and one of the most profitable airlines, before it was acquired by USAir last year.

Braniff’s departing vice chairman and chief executive officer J. Patrick Foley was quoted as saying that the company’s new board of directors and management would be in Dallas Monday.

″I believe those who are coming in know the business,″ Foley was quoted as saying in early Sunday editions of the Dallas Times Herald. ″If you analyze what Braniff is today and what Piedmont was 10 years ago, you can see very similar airlines.″

The newspaper quoted Foley as saying part of the financing for the buyout would come from the sale of some of the company’s assets.

Braniff posted a net loss of $8.1 million in the first quarter of this year.

Reports earlier said Fort Worth-based American Airlines was considering the purchase of $40 million of Braniff’s assets, including terminal gates at Dallas-Fort Worth International Airport.

Braniff primarily serves the Southwest, but analysts have speculated that it may try to reduce its operations at Dallas-Fort Worth, where there is strong competition between Fort Worth-based American Airlines and Atlanta- based Delta Airlines, and expand operations at its second hub at Kansas City International airport, where competition is less severe.

Foley was quoted as saying he believes the group will keep Braniff’s headquarters in Dallas but expand its Kansas City, Mo., hub.

Braniff’s new board includes Chodorow, a real estate investor who is a principal in the Philadelphia-based investment firm CoreGroup Inc.

Other new board members include CoreGroup principals Gerald Broker and Larry D. Yogel, New York real estate investor Arthur G. Cohen and one of his associates, Steven M. Terk, attorney Marvin Tepper and Joseph Steuert, managing director of Paine Webber’s investment banking division.

Paine Webber will control a majority of the airline, the BIA statement said.

Dalfort owned 64 percent of the airline’s common stock and all of its Series A preferred stock, which gave it more than 90 percent of the stock voting rights.

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