Robert Mann [HPN-NY]
(AVSIG Member)
11/16/06 08:15 AM
Re: USAir to Buy Delta?

Tom,

There are some big hurdles to get past for this deal to happen. As of now, I wouldn't bet on it.

First, this is a hostile takeover. Gerald Grinstein, CEO of Delta, indicated he's not interested in this deal, and has spurned prior expressions of interest from US. Hostile takeovers are inherently difficult if there is no interest in the deal on the part of the target's senior management. Typically, there isn't, which is why a suitor would go hostile in the first place.

Second, Delta is in a Ch 11 bankruptcy. As big a hurdle as a hostile takeover is, when the target is in a Ch 11, it is several times harder. US would have to convince the Creditors Committee that such a deal is in their best interests. That is no easy task. Moreover, until Feb 15, 2007, Delta has the exclusive right to file a Plan of Reorg. That date could get extended further, putting US's offer further out there in limbo. Furthermore, if the deal can't be completed prior to the completion of the bankruptcy reorg, a lot of the synergistic cost savings won't be realized.

Finally, the deal would require antitrust approval, which is hardly assured. They both are major competitors up and down the east coast, and in the southeast, they together control a big piece of the market. Then there's also the Shuttle where they compete head to head. One of the carriers could sell off their shuttle which would make that problem go away, but the overall antitrust approval issue is a big one.



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