US Airways Pulls Bid for Delta
AFP, Bloomberg | Feb. 02, 2007
US Airways has withdrawn its offer for Delta Air Lines in the face of resistance from the bankrupt carrier's management and a creditor committee's unwillingness to embrace the plan.
The latest offer, estimated to be worth some $US10.2 billion, was set to expire on Feb. 2, but Delta management had been pressing for a plan to emerge from creditor protection on its own this year.
On Jan. 30, Delta had announced commitments for $US2.5 billion in financing for the company's plan "to exit bankruptcy in spring 2007 as a strong, well-capitalised stand-alone carrier."
US Airways, which itself emerged from bankruptcy protection in September 2005 in a deal that merged the old company with low-cost carrier America West, said it was disappointed but could not move ahead with its plan for Delta.
US Airways chairman and chief executive Doug Parker said the deal could not move forward because the creditor committee, a key player in bankruptcy proceedings, declined to allow a full examination of Delta's finances, a process known as due diligence.
"We are disappointed that the committee, which has been chosen to act on behalf of all Delta creditors, is ignoring its fiduciary obligation to those creditors," he said.
"Our proposal would have provided substantially more value to Delta's unsecured creditors than the Delta stand-alone plan."
Delta chief executive Gerald Grinstein said he bore no grudge against Mr Parker for mounting a hostile bid for bankrupt Delta.
"If I showed you an email exchange we had today, it would show that it is not personal," Mr Grinstein said.
The US Airways offer proposed to give Delta's creditors $US5 billion in cash and 89.5 million US Airways shares.
A statement by the creditors committee said the panel had decided to support the Delta "stand-alone plan of reorganisation" filed later in court.
"The creditors committee reached this determination after engaging in extensive discussions with representatives of Delta and US Airways over the last two months and upon consideration of the advice of the creditors committee's legal, financial and industry advisers," the statement said.
The panel said it weighed "a variety of factors, including, but not limited to, valuation of, the timing and the risks associated with, and the likelihood of a successful consummation of the US Airways proposal."
Some reports said Delta had begun merger talks with Northwest Airlines, which is also in bankruptcy protection, as another possible alternative.