Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:
Surprise Hostile Bid for Delta May Spur Airline Merger Wave [Wall Street Journal]
Summary: US Airways' $8.67b hostile takeover bid for Delta Air Lines would create the U.S.'s biggest airline and bring Delta out of the bankruptcy protection it's been in for more than a year. Other airline stocks were buoyed by the news. Delta CEO Gerald Grinstein says he wants Delta to emerge from bankruptcy proceedings on its own. US Airways will need Delta-creditor support and antitrust approval if it hopes to push the hostile bid through. Bankruptcy code requires 2/3 creditor approval for a restructuring claim, and Delta management has the exclusive right to file a plan with the courts until Feb. 15 -- hostile takeovers in the midst of bankruptcy protection are a rare breed. Ultimately Grinstein must make creditors believe he's got the better deal, especially after the market's "euphoric" reaction, which drove LCC shares up 17%. The offer is for $4b in cash, and 78.5m LCC shares ($4.67b as of yesterday's close); analysts say creditors would get $0.50 on the dollar (Delta bonds went from $0.40/$1 to above $0.50 yesterday). The combined airline, said US Airways' CEO Doug Parker, would be called Delta, and would cut about 10% of its capacity. Some unknowns: (1) Other bidders? Some suggest Northwest, the other big airline still in bankruptcy protection. (2) Can Parker win over self-interested, feuding creditors? (3) Will employees/unions cooperate with cost-saving measures? (4) Will the Justice Department approve the deal?
Related links: Media coverage: Flight Data: How US Airways/Delta Compare [WSJ] • Airline-Industry Experts React To Proposed Deal [WSJ]. Commentary: Citi Advises US Airways in Hostile Bid for Delta • Merger Mania Grips the Airlines • Delta Airlines Update • You Don't Have to be Crazy to Buy Airlines • Jim Cramer on LCC.
Potentially impacted stocks and ETFs: US Airways Group Inc. (LCC) • Competitors: AMR Corp. (AMR), Continental Airlines Corp. (NYSE:CAL), Southwest Airlines Co. (NYSE:LUV), JetBlue Airways Corp. (NASDAQ:JBLU), UAL Corp. (UAUA), AirTran Holdings Inc. (AAI)
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