US Airways withdrew its $9.8 billion hostile bid to take over Delta Airlines when the bankrupt takeover target reached a deal with its creditors yesterday. A February 7 bankruptcy hearing on Delta's proposed stand-alone reorganization plan will now take place as planned. US Airways had wanted the hearing postponed because the cost of a merger will become prohibitively expensive once Delta emerges from bankruptcy protection. The withdrawal of US Airways' offer scuppers the creation of what would have been the world's biggest airline. Delta's creditors' committee decided to go with the Delta plan because of "valuation..., timing and the risks associated with, and the likelihood of, a successful consummation of the U.S. Airways proposal." US Airways proved unable to convince Delta's creditors to open the airline's books by yesterday's deadline. A miffed Doug Parker, CEO of US Airways, said, "Our proposal would have provided substantially more value to Delta's unsecured creditors than the Delta stand-alone plan," and asserted that the creditors' committee was "ignoring its fiduciary obligation" to the people it represents. U.S. Airways' bid would have provided Delta's unsecured creditors with $12.7-15.4 billion in value, while Delta's stand-alone plan values the company at $9.4-12 billion.
Sources: Wall Street Journal, MarketWatch (I, II), New York Times
Commentary: Deal or No Deal? US Airways Reportedly Sweetens Offer by $1B for Delta • Delta Faces Congressional Scrutiny and Impatient Debtors • There's a Reason There Is No Airline ETF
Stocks/ETFs to watch: US Airways Group, Inc. (LCC), Delta Air Lines, Inc. (DALRQ.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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