US Airways Ups Ante for Delta to $10.2 Billion

Includes: AAL, DAL
by: SA Editors

US Airways has boosted its hostile takeover bid for bankrupt Delta Airways by 28% to $10.2 billion. The new deal is designed to force a decision from Delta's creditors, who were undecided after US Airways' previous bid of $8.5 billion. They have until February 1 to respond. According to the Wall Street Journal, "the new proposal will provide between $12.7 billion and $15.4 billion in value to Delta's unsecured creditors, a hefty premium over the $9.4 billion to $12 billion valuation that Delta places on its standalone plan." Delta management says the new offer, like the old one, fails to address its concerns about anti-trust and labor issues and the combined company's debt burden. Eager for alternatives, Delta has been talking with Northwest Airlines, also in Chapter 11, about a link-up. US Airways expects the acquisition to add to EPS in the first year, but it will also more than double its shares outstanding and elevate its debt far beyond its current market value of $5.1 billion.

• Sources: Bloomberg, Reuters, Wall Street Journal, The Platform. Conference call transcripts: January 10, 2007
• Related commentary: Northwest and Delta Flirt with Merger, War of Words Between Delta and US Airways Intensifies, Delta Tries to Trump US Airways Buyout Through Bankruptcy, US Airways Surprises Delta With Hostile Bid, Merger Mania Grips the Airlines
• Potentially impacted stocks and ETFs: Delta Air Lines, Inc. (DALRQ), US Airways Group Inc. (LCC), Northwest Airlines Corp. (NWACQ.PK). Competitors: AMR Corporation (AMR), Southwest Airlines Co. (NYSE:LUV), UAL Corp. (UAUA). ETFs: streetTRACKS DJ Wilshire Small Cp Growth (Pending:DSG)

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