US Airways raises Delta bid to $10.2bn

US Airways raises Delta bid to $10.2bn
By Doug Cameron in Chicago
Copyright The Financial Times Limited 2007
Published: January 10 2007 13:51 | Last updated: January 10 2007 16:05


US Airways boosted its unsolicited offer for Delta Air Lines by almost a quarter to $10.2bn on Wednesday in an effort to push its larger rival to the negotiating table and fend off rival suitors.

The widely-expected move comes days after US Airways expanded its funding commitments for the proposed bid to create the world’s largest airline by revenues, despite the rejection of its overtures by Delta management.

US Airways lifted the cash component of its offer – which is being made direct to bankrupt Delta’s creditors - from $4bn to $5bn, and boosted the number of shares on offer from 78.5m to 89.5m.

Delta said in a statement that while it would review the new bid, “the revised proposal does not address significant concerns that have been raised about the initial US Airways proposal and, in fact, would increase the debt burden of the combined company by yet another $1bn.”

The new terms run until February 1, and value Delta at $10.2bn, based on Tuesday’s share price. This compares to $8bn when US Airways unveiled its first offer on November 15.

However, US Airways also require antitrust clearance. A positive signal from regulators is expected to trigger further deal-making, with United and Continental monitoring the outcome.

Delta’s standalone plan values the carrier at $9bn-$12bn but lacks any cash component, and US Airways has criticised the upper end of the range as unrealistic because of its assumptions about future revenue growth.

Delta’s unsecured creditors’ committee and an unofficial grouping of bondholders are both reviewing the competing bids, and Delta is seeking a court hearing next month to secure backing for its stand-alone plan. The unsecured creditors last month hired Gordon Bethune, former Continental chairman, as an adviser to evaluate the competing claims.

News of US Airways’ renewed offer comes amid pressure on airline stocks following announcements from a number of carriers that the year-long surge in revenues is easing, leading some to forecast losses in the weak fourth calendar quarter.