Cargo Holdings looks on target to join ABX AirBut a dispute between DHL and ABX casts a pall over the $350 million deal.

Orlando-based Cargo Holdings International is scheduled to become part of ABX Air Inc. of Wilmington, Ohio -- one of two main cargo companies that carry packages for DHL Express -- assuming a dispute between ABX and DHL doesn't upset the $350 million...


Orlando-based Cargo Holdings International is scheduled to become part of ABX Air Inc. of Wilmington, Ohio -- one of two main cargo companies that carry packages for DHL Express -- assuming a dispute between ABX and DHL doesn't upset the $350 million acquisition.

ABX announced earlier this month it would buy Cargo Holdings, which has 600 employees and whose best-known subsidiary is Orlando-based Capital Cargo International Airlines. The purchase, expected to be completed by the end of the year, would beef up ABX's fleet to more than 135 aircraft and, according to the company, give it the largest fleet of Boeing 767 freighter aircraft in the world.

Joe Hete, president and chief executive officer of ABX, said in a press release that the purchase of Cargo Holdings would allow it to better serve DHL while also allowing it to diversify beyond that express-mail company, which currently accounts for about 90 percent of ABX's business.

Cargo Holdings provides air-cargo transportation and services to various carriers. Its two biggest customers are the U.S. government and the global logistics company BAX/Schenker. According to ABX, Cargo Holdings expects revenue of $300 million this year, while ABX had 2006 revenue of $1.26 billion.

ABX Air said it intends to create a holding company, ABX Holdings Inc., with ABX Air and Cargo Holdings becoming wholly owned subsidiaries of the new corporate parent. It said the acquisition would be financed with the issuance of 4 million shares of ABX Holdings common stock and with cash from a new, $345 million senior secured credit facility led by SunTrust and Regions banks.

But last Friday, one week after the deal was announced, ABX's stock took a nosedive. Trading earlier in the week at above $6, its stock plunged by 40 percent at one point. It recovered somewhat later in the day but was still well below $5. (It closed Monday at $4.51 a share.)

The drop came after ABX disclosed in a filing with the U.S. Securities and Exchange Commission that DHL had defaulted on two payment agreements, which it said could cause ABX to default, in turn, on some of its agreements.

While officials with ABX and Cargo Holdings could not be reached Monday for comment, indications were that the sale would go through despite the problems with DHL. Hete said in a company press release on Friday that "ABX Air is today, and intends to remain, DHL's principal U.S. business partner."

Part of the dispute between ABX and DHL may stem from a spurned offer for ABX made during the summer by Miami-based Astar Air Cargo Holdings, the other main cargo company used by DHL, a German-based company.

Astar Air Cargo, formerly DHL Airways Inc., offered ABX a premium of $7.75 a share, but ABX turned it down, saying the offer did "not represent adequate value for stockholders."

CONTACT: Harry Wessel can be reached at hwessel@orlandosentinel.com or 407-420-5506.

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