Citigroup pilots $8bn hostile US Airways bid Private Equity News
15 November 2006 Citigroup is leading US Airwaysâ $8bn (â¬6.2bn) hostile bid for bankrupt rival Delta Air Lines. The US airline today took its proposal directly to investors after Deltaâs chief executive rejected its overtures last month.
US Airways, whose main shareholders include US hedge funds Par Capital Management and Peninsula Investment Partners following its $1.5bn takeover in May last year, said in today's statement it had made a “merger proposal” to Delta.
US Airways went public with the plan, which will involve it paying Delta’s unsecured creditors $4bn in cash plus 78.5 million shares of US Airways common stock worth roughly $4bn based on yesterday’s $50.93 closing price, to take advantage of the fact that Delta is going through bankruptcy.
Delta is expected to emerge from the process next year, and its chief executive Gerald Grinstein said last month the company intends to operate as a standalone group. US Airways wants to combine the two companies at this stage.
Citigroup is advising US Airways and will fund the bid through a $7.2bn financing package.
US Airways, which said in an open letter to Grinstein it has taken its offer public after he “declined to meet or even enter into discussions” with it last month, stated: “Because the benefits of a merger of US Airways and Delta are so compelling to both our companies’ stakeholders, we believe it is important to inform them about our proposal.
“A combination presents a significantly greater value for Delta’s creditors, customers, employees and partners than a plan to emerge from bankruptcy on a standalone basis. We also believe that unless we act quickly to pursue a combination through the actions that can be taken during Delta’s bankruptcy process, our respective stakeholders will not be able tom realise what we believe are substantial economic benefits from such a combination.”
Par Capital Management is supporting the offer.
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