FL Group suggests alternatives to AMR for unlocking shareholder value, including a spinoff

By Lisa Kerner

Charlotte, N.C., Sept. 27 - AMR Corp. investor FL Group hf, in a Sept. 25 letter to the company's board of directors, urged AMR to promptly consider strategic alternatives that it said would significantly increase shareholder value.

FL Group said in its letter that it was unaware of "any specific plans that management may have to enhance shareholder value. This, when taken with the company's recent disappointing and surprising earnings guidance, has meant that we now feel compelled to write to you (the board) directly."

The letter was included as part of a schedule 13D filing with the Securities and Exchange Commission and also issued as part of an FL Group news release.

Specifically, FL Group proposed that the Fort Worth, Texas, airline company partially spin off its AAdvantage Frequent Flyer program to increase shareholder value by some $4 billion. In addition, the investor suggested AMR unbundle its aircraft maintenance and repair unit and its American Eagle regional airline.

AMR's share price has fallen almost 50% since January 2007, costing AMR shareholders close to $5 billion, according to the FL Group release, which said "simply blaming high fuel costs and investor sentiment is not a sufficient response."

The problem, according to FL Group, is that "AMR's structure as a fully integrated legacy carrier means that the profitability of its individual business units is not easily understood by investors and analysts."

"FL Group has significant experience in the airline sector and strongly believes that there are strategic alternatives which should be considered to increase shareholder value," Hannes Smárason, the investment company's chief executive officer, stated in the news release.

"After taking a close look at the company over an extended period of time, our suggestions include monetizing assets, such as AAdvantage, that can be used to reduce debt or return capital to shareholders. We believe that there is no time to lose given the recent developments in the market place."

FL Group, based in Reykjavik, Iceland, holds 8.25% of AMR's outstanding stock, making it one of the company's largest shareholders. The investor may "seek to engage in discussions" with company management or fellow shareholders about AMR's business or operations, as noted in the SEC filing.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.