US Airways buying American?
01-31-2007, 02:26 PM
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US Airways buying American?
USAirways Places $46.5B Buyout Offer for American Airlines
January 31, 2007 2:30 EST
Tempe, AZ (AP Business Wire)
In the wake of this morning's withdrawal of its bid for Delta Air Lines, USAir promptly followed up with an even larger and more ambitious $46.5 billion offer for Dallas, Texas-based American Airlines. The buyout offer, according to sources close to the deal, is composed of $23 billion in USAirways stock and $23 Billion in cash with $22.5 billion of that cash being borrowed from Wall Street investment and banking firms. The combined airline would be the largest in the world but would also be encumbered with significant levels of debt with over $65 billion in long-term debt obligations. Sources close to USAirways management have further stated that a condition to consummation of the deal is that American Airlines file for bankruptcy no later than March 1st so that the bankruptcy process can be utilized in order to take advantage of "large, advantageous and significant synergies that can only be achieved through the courts". Unnamed sources further stated that in order to achieve these synergies, approximately 400 American Airlines aircraft would be returned to lessors.
Ray Niedl, an airline analyst with Caylon Securities voiced initial skepticism about the deal. "The total debt service in the aftermath of a successful combination might prove to be burdensome. I think it has little chance of working, either from a business, investment, banking or regulatory standpoint", he said. A USAirways executive who wished to remain anonymous out of sheer embarrassment tried to address those concerns by stating, "Synergistically and maximally combined strengths will provide enhanced valuation in a dysfunctionally fragmented marketplace." He did not elaborate.
In an attempt to quell an already rising tide of opposing sentiment amongst American Airlines employees, USAirways CEO Doug Parker elected to field questions on the steps of USAirways headquarters in Tempe. "This will be a good deal for all stakeholders, including employees," said Parker. "Any employee reductions resulting from the parking of 35% of the combined fleet can be easily achieved through attrition." When asked about the contractual provisions of American's pilot contract that stipulate that all flying over 70 seats must be flown by American Airlines pilots and the fact that he's attempting to integrate a vastly larger seniority list with a so-far unsuccessfully combined America West/USAirways list Parker stated that, "We haven't looked at that yet and are taking the position that potential problems with this deal will go away if we pretend they don't exist." In a surprisingly candid comment, he elaborated on his motivation for coming up with this new deal so quickly after withdrawing his Delta bid. "The short-term hedge fund traders who stood to profit so greatly at the hands of Delta employees and who had no long-term interest in the success or failure of our proposed Delta buyout were despondent when informed of our decision this morning regarding Delta. I hastily put this deal together to further ingratiate myself with them, 'cause they're really the only people around here who like me." He also tried to address concerns from the investment community as to the balance sheet of the combined airline by saying, "The level of debt doesn't matter at all. For example, look at GE. They have over $400 Billion in debt." After it was pointed out to him that GE's debt is investment grade paper that is part of their business banking services, Parker declined to take further questions.
PS...copied from a yahoo message board. I thought this was classic.
January 31, 2007 2:30 EST
Tempe, AZ (AP Business Wire)
In the wake of this morning's withdrawal of its bid for Delta Air Lines, USAir promptly followed up with an even larger and more ambitious $46.5 billion offer for Dallas, Texas-based American Airlines. The buyout offer, according to sources close to the deal, is composed of $23 billion in USAirways stock and $23 Billion in cash with $22.5 billion of that cash being borrowed from Wall Street investment and banking firms. The combined airline would be the largest in the world but would also be encumbered with significant levels of debt with over $65 billion in long-term debt obligations. Sources close to USAirways management have further stated that a condition to consummation of the deal is that American Airlines file for bankruptcy no later than March 1st so that the bankruptcy process can be utilized in order to take advantage of "large, advantageous and significant synergies that can only be achieved through the courts". Unnamed sources further stated that in order to achieve these synergies, approximately 400 American Airlines aircraft would be returned to lessors.
Ray Niedl, an airline analyst with Caylon Securities voiced initial skepticism about the deal. "The total debt service in the aftermath of a successful combination might prove to be burdensome. I think it has little chance of working, either from a business, investment, banking or regulatory standpoint", he said. A USAirways executive who wished to remain anonymous out of sheer embarrassment tried to address those concerns by stating, "Synergistically and maximally combined strengths will provide enhanced valuation in a dysfunctionally fragmented marketplace." He did not elaborate.
In an attempt to quell an already rising tide of opposing sentiment amongst American Airlines employees, USAirways CEO Doug Parker elected to field questions on the steps of USAirways headquarters in Tempe. "This will be a good deal for all stakeholders, including employees," said Parker. "Any employee reductions resulting from the parking of 35% of the combined fleet can be easily achieved through attrition." When asked about the contractual provisions of American's pilot contract that stipulate that all flying over 70 seats must be flown by American Airlines pilots and the fact that he's attempting to integrate a vastly larger seniority list with a so-far unsuccessfully combined America West/USAirways list Parker stated that, "We haven't looked at that yet and are taking the position that potential problems with this deal will go away if we pretend they don't exist." In a surprisingly candid comment, he elaborated on his motivation for coming up with this new deal so quickly after withdrawing his Delta bid. "The short-term hedge fund traders who stood to profit so greatly at the hands of Delta employees and who had no long-term interest in the success or failure of our proposed Delta buyout were despondent when informed of our decision this morning regarding Delta. I hastily put this deal together to further ingratiate myself with them, 'cause they're really the only people around here who like me." He also tried to address concerns from the investment community as to the balance sheet of the combined airline by saying, "The level of debt doesn't matter at all. For example, look at GE. They have over $400 Billion in debt." After it was pointed out to him that GE's debt is investment grade paper that is part of their business banking services, Parker declined to take further questions.
PS...copied from a yahoo message board. I thought this was classic.
02-01-2007, 04:46 AM
#7
Gets Weekends Off
Joined APC: Sep 2005
Position: Retired
Posts: 157
If you think the above was funny, the reality of it all is that the only difference between it and the Delta offer are the numbers.
I don't see it as funny because in the next 5yrs. this or something close is going to happen.
I don't see it as funny because in the next 5yrs. this or something close is going to happen.
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