US Airways – Delta Merger Update: December 10, 2007
CNBC Interview with Doug Parker
See Story
US Airways Ups offer for Delta (CNBC Video Presentation)
See Story
LCC RAISES BID FOR DAL – Lehman Brothers Investment Report
We see LCC shares as no more than fairly valued in the absence of a transaction with potential upside on completion of a merger, so we see continued upside potential for LCC despite the revised terms. We believe key beneficiaries of this deal, which in our view are AAI and JBLU, remain appealing absent the transaction and the merits of a transaction from their perspective are not linked to LCC deal terms.
While there are disproportionate beneficiaries, we expect all the stocks to trade well today as the consolidation story is back on center stage.
* LCC raises bid for Delta from $4bn and 78mm shares to $5bn and 89.5mm shares. Revised terms expire on Feb 1 absent essential creditor support for commencement of due diligence, HSR filing, and postponement of the currently scheduled Feb. 7 hearing on Delta's disclosure statement.
* New deal terms very much in line with current bond prices which had advanced well beyond initial LCC deal terms. Offer value is $10.2bn based on last night's close to a comparable Delta stand-alone valuation, in our view, of $8-9.5bn.
* Pro Forma stock price target would likely change from $73 to $65-66 based on revised terms, still reasonable upside potential in our view, especially in the context of shares that are not presently overvalued. Earnings accretion would likely still be substantial.
* We view this offer as compelling from a creditor perspective, but antitrust is a source of uncertainty, in our view.
US Airways Raises Offer For Delta Air Lines
Offer Valued at $12.7 to 15.4 Billion and Set to Expire on February 1, 2007 Absent Creditor Support
January 10, 2007
**An analyst webcast will be held today at 9 a.m. EST/7 a.m. MST and employees are welcome to listen in. To do so, visit www.usairways.com, and click “About US>>Investor Relations>> Webcasts/Presentations/Updates.â€
US Airways Group, Inc. today announced that it has increased its offer to merge with Delta Air Lines, Inc. Under the revised proposal:
Delta’s unsecured creditors would receive $5.0 billion in cash and 89.5 million shares of US Airways stock.
When applying the same valuation methodology and assumptions as described in Delta’s Disclosure Statement, US Airways' advisor Citigroup estimates this new proposal will provide between $12.7 and 15.4 billion in value to Delta's unsecured creditors, which represents a significant premium over the $9.4 to 12.0 billion valuation that Delta places on its stand-alone plan.
Based on the closing price of US Airways stock as of Tuesday, Jan. 9, 2007, the new proposal has a current market value of approximately $10.2 billion.
The merger is expected to be accretive to US Airways’ earnings per share in the first full year after completion of the merger.
The increased offer is set to expire on Feb. 1, 2007 unless there is affirmative creditor support for commencement of due diligence, making the required filings under Hart-Scott-Rodino, as well as the postponement of Delta’s hearing on its Disclosure Statement scheduled for Feb. 7, 2007.
US Airways has committed financing from Citigroup and Morgan Stanley for the proposed transaction for $8.2 billion, representing $5.0 billion to fund the cash portion of the offer and $3.2 billion in refinancing existing obligations at both US Airways and Delta.
US Airways Chairman and Chief Executive Officer Doug Parker stated, “While our original proposal offered substantially more value to Delta's unsecured creditors than the Delta stand-alone plan, we are making this revised offer to eliminate any doubt that a merger with US Airways offers Delta's unsecured creditors significantly more value. Without the support of the creditors, our offer is set to expire on Feb. 1. It is time for this process to move forward. We continue to believe that this is the right time to create a better airline that provides more choice to consumers, increased job security for both airlines’ employees and generates more value for all of our stakeholders.â€
Consumers across the nation will benefit from greater choice and lower fares from the “New†Delta. Since the combination of America West and US Airways in 2005, US Airways has lowered leisure and business fares by up to 83 percent in about 1,000 markets. Every domestic destination served today by either US Airways or Delta will continue to be served by the New Delta, which will provide consumers across the nation access to a larger network that connects them to more people and places.
Employees also will benefit from working for a larger and more competitive airline. As US Airways has already announced, frontline employees of the New Delta will move to the higher cost structure of the combined airlines, and there will be no furloughs of frontline employees of either Delta or US Airways. The combination of US Airways and America West, which was accomplished without any involuntary mainline furloughs despite capacity reductions of 15 percent, demonstrates that a merger can be in the best interests of employees, not just shareholders.
“This is a transaction that makes sense for US Airways stockholders, Delta creditors, the employees and customers of both companies, and the communities that we serve,†said Parker.
The revised US Airways proposal retains the same conditions as the original offer and is conditioned on satisfactory completion of a due diligence investigation, which the Company believes can be completed expeditiously, approval by Delta’s Bankruptcy Court of a mutually agreeable plan of reorganization that would be predicated upon the merger, regulatory approvals, and the approval of the shareholders of US Airways.
Citigroup Corporate and Investment Banking is acting as financial advisor to US Airways, and Skadden, Arps, Slate, Meagher & Flom LLP is acting as primary legal counsel, with Fried, Frank, Harris, Shriver & Jacobson LLP as lead antitrust counsel to US Airways.
US Airways executives will be discussing the proposal with analysts and investors on a conference call at 9:00 a.m. ET / 7:00 a.m. MT today, Jan. 10, 2007. To access the conference call, please dial (866) 290-0880 (U.S. dial-in) or (913) 312-1229 (international dial-in) beginning at 8:45 a.m. ET / 6:45 a.m. MT and ask to be connected to the US Airways conference call (conference ID# 4318844). A replay of the call will be available until Jan. 12, 2007 by dialing 888-203-1112 (U.S. dial-in) or 719-457-0820 (international dial-in) (replay passcode # 4318844).
US Airways – Delta Merger Conference Call and PowerPoint Presentation
See Story
Delta Air Lines Creditor Group Urges Company to Take Steps to Respond to Increased US Airways' Offer (Press Release)
The Unofficial Committee believes that it is in the best interests of Delta and its stakeholders for Delta to immediately take the following steps:
1. Provide reasonable and customary access for US Airways to perform its due diligence in a manner consistent with similar transactions.
2. Fully cooperate with US Airways to make the required filings under HSR.
3. Postpone Delta's Disclosure Statement hearing currently scheduled for February 7, 2007 to allow Delta to fully evaluate US Airways' proposal.
4. Include the active participation and input of the Unofficial Committee's advisors with respect to the US Airways' proposal and other strategic alternatives.
5. Desist from taking actions intended to deter other companies from proposing transactions with Delta that may result in greater creditor recoveries than under a stand-alone Chapter 11 plan.
See Story
Delta creditor group urges response to US Airways
See Story
WSJ: Northwest talking with Delta on deal
See Story
US Airways Ups Offer for Delta Air Lines Almost 20 Percent to $10.3 Billion
See Story
US Airways raises offer for Delta to $10.3 billon
See Story
Airlines Jockey For Delta
See Story
New Twists in Delta Chase
See Story
US Airways May Shed Gates in Charlotte
See Story
US Airways puts ball in creditors' court
See Story
US Airways increases offer to rival - Carrier to delay a decision on where to place a new flight-operations control center
See Story
Regards,
USA320Pilot
CNBC Interview with Doug Parker
See Story
US Airways Ups offer for Delta (CNBC Video Presentation)
See Story
LCC RAISES BID FOR DAL – Lehman Brothers Investment Report
We see LCC shares as no more than fairly valued in the absence of a transaction with potential upside on completion of a merger, so we see continued upside potential for LCC despite the revised terms. We believe key beneficiaries of this deal, which in our view are AAI and JBLU, remain appealing absent the transaction and the merits of a transaction from their perspective are not linked to LCC deal terms.
While there are disproportionate beneficiaries, we expect all the stocks to trade well today as the consolidation story is back on center stage.
* LCC raises bid for Delta from $4bn and 78mm shares to $5bn and 89.5mm shares. Revised terms expire on Feb 1 absent essential creditor support for commencement of due diligence, HSR filing, and postponement of the currently scheduled Feb. 7 hearing on Delta's disclosure statement.
* New deal terms very much in line with current bond prices which had advanced well beyond initial LCC deal terms. Offer value is $10.2bn based on last night's close to a comparable Delta stand-alone valuation, in our view, of $8-9.5bn.
* Pro Forma stock price target would likely change from $73 to $65-66 based on revised terms, still reasonable upside potential in our view, especially in the context of shares that are not presently overvalued. Earnings accretion would likely still be substantial.
* We view this offer as compelling from a creditor perspective, but antitrust is a source of uncertainty, in our view.
US Airways Raises Offer For Delta Air Lines
Offer Valued at $12.7 to 15.4 Billion and Set to Expire on February 1, 2007 Absent Creditor Support
January 10, 2007
**An analyst webcast will be held today at 9 a.m. EST/7 a.m. MST and employees are welcome to listen in. To do so, visit www.usairways.com, and click “About US>>Investor Relations>> Webcasts/Presentations/Updates.â€
US Airways Group, Inc. today announced that it has increased its offer to merge with Delta Air Lines, Inc. Under the revised proposal:
Delta’s unsecured creditors would receive $5.0 billion in cash and 89.5 million shares of US Airways stock.
When applying the same valuation methodology and assumptions as described in Delta’s Disclosure Statement, US Airways' advisor Citigroup estimates this new proposal will provide between $12.7 and 15.4 billion in value to Delta's unsecured creditors, which represents a significant premium over the $9.4 to 12.0 billion valuation that Delta places on its stand-alone plan.
Based on the closing price of US Airways stock as of Tuesday, Jan. 9, 2007, the new proposal has a current market value of approximately $10.2 billion.
The merger is expected to be accretive to US Airways’ earnings per share in the first full year after completion of the merger.
The increased offer is set to expire on Feb. 1, 2007 unless there is affirmative creditor support for commencement of due diligence, making the required filings under Hart-Scott-Rodino, as well as the postponement of Delta’s hearing on its Disclosure Statement scheduled for Feb. 7, 2007.
US Airways has committed financing from Citigroup and Morgan Stanley for the proposed transaction for $8.2 billion, representing $5.0 billion to fund the cash portion of the offer and $3.2 billion in refinancing existing obligations at both US Airways and Delta.
US Airways Chairman and Chief Executive Officer Doug Parker stated, “While our original proposal offered substantially more value to Delta's unsecured creditors than the Delta stand-alone plan, we are making this revised offer to eliminate any doubt that a merger with US Airways offers Delta's unsecured creditors significantly more value. Without the support of the creditors, our offer is set to expire on Feb. 1. It is time for this process to move forward. We continue to believe that this is the right time to create a better airline that provides more choice to consumers, increased job security for both airlines’ employees and generates more value for all of our stakeholders.â€
Consumers across the nation will benefit from greater choice and lower fares from the “New†Delta. Since the combination of America West and US Airways in 2005, US Airways has lowered leisure and business fares by up to 83 percent in about 1,000 markets. Every domestic destination served today by either US Airways or Delta will continue to be served by the New Delta, which will provide consumers across the nation access to a larger network that connects them to more people and places.
Employees also will benefit from working for a larger and more competitive airline. As US Airways has already announced, frontline employees of the New Delta will move to the higher cost structure of the combined airlines, and there will be no furloughs of frontline employees of either Delta or US Airways. The combination of US Airways and America West, which was accomplished without any involuntary mainline furloughs despite capacity reductions of 15 percent, demonstrates that a merger can be in the best interests of employees, not just shareholders.
“This is a transaction that makes sense for US Airways stockholders, Delta creditors, the employees and customers of both companies, and the communities that we serve,†said Parker.
The revised US Airways proposal retains the same conditions as the original offer and is conditioned on satisfactory completion of a due diligence investigation, which the Company believes can be completed expeditiously, approval by Delta’s Bankruptcy Court of a mutually agreeable plan of reorganization that would be predicated upon the merger, regulatory approvals, and the approval of the shareholders of US Airways.
Citigroup Corporate and Investment Banking is acting as financial advisor to US Airways, and Skadden, Arps, Slate, Meagher & Flom LLP is acting as primary legal counsel, with Fried, Frank, Harris, Shriver & Jacobson LLP as lead antitrust counsel to US Airways.
US Airways executives will be discussing the proposal with analysts and investors on a conference call at 9:00 a.m. ET / 7:00 a.m. MT today, Jan. 10, 2007. To access the conference call, please dial (866) 290-0880 (U.S. dial-in) or (913) 312-1229 (international dial-in) beginning at 8:45 a.m. ET / 6:45 a.m. MT and ask to be connected to the US Airways conference call (conference ID# 4318844). A replay of the call will be available until Jan. 12, 2007 by dialing 888-203-1112 (U.S. dial-in) or 719-457-0820 (international dial-in) (replay passcode # 4318844).
US Airways – Delta Merger Conference Call and PowerPoint Presentation
See Story
Delta Air Lines Creditor Group Urges Company to Take Steps to Respond to Increased US Airways' Offer (Press Release)
The Unofficial Committee believes that it is in the best interests of Delta and its stakeholders for Delta to immediately take the following steps:
1. Provide reasonable and customary access for US Airways to perform its due diligence in a manner consistent with similar transactions.
2. Fully cooperate with US Airways to make the required filings under HSR.
3. Postpone Delta's Disclosure Statement hearing currently scheduled for February 7, 2007 to allow Delta to fully evaluate US Airways' proposal.
4. Include the active participation and input of the Unofficial Committee's advisors with respect to the US Airways' proposal and other strategic alternatives.
5. Desist from taking actions intended to deter other companies from proposing transactions with Delta that may result in greater creditor recoveries than under a stand-alone Chapter 11 plan.
See Story
Delta creditor group urges response to US Airways
See Story
WSJ: Northwest talking with Delta on deal
See Story
US Airways Ups Offer for Delta Air Lines Almost 20 Percent to $10.3 Billion
See Story
US Airways raises offer for Delta to $10.3 billon
See Story
Airlines Jockey For Delta
See Story
New Twists in Delta Chase
See Story
US Airways May Shed Gates in Charlotte
See Story
US Airways puts ball in creditors' court
See Story
US Airways increases offer to rival - Carrier to delay a decision on where to place a new flight-operations control center
See Story
Regards,
USA320Pilot
