US Airways Raises Delta Offer to $10.4 Billion

US Airways Group Inc. raised its offer for Delta Air Lines Inc. by almost 20 percent to $10.4 billion (euro8.01 billion) on Wednesday, as it seeks to put pressure on the bankrupt carrier's creditors to agree to a deal that Delta's management opposes.

It also set a Feb. 1 deadline for certain conditions to be met or its entire bid would be revoked.

US Airways said it would raise its offer by $1.7 billion (euro1.31 billion) from its Nov. 15 bid that was currently valued at $8.7 billion (euro6.7 billion).

US Airways shares rose $2.10, or 3.6 percent, to $60 in morning trading Wednesday on the New York Stock Exchange, boosting the value of the revised offer.

The increased offer comes just two weeks after the chief of Tempe, Arizona-based US Airways, Doug Parker, told The Associated Press that his company had no intention at the time to increase its offer.

Even so, Parker did not rule out at the time the possibility of changing his mind about the price.

Parker said Wednesday that US Airways was raising its bid to remove any doubt that its bid was worth more than Delta's plan to remain a standalone carrier.

"Right now, we feel very good about our chances of getting this done" despite Delta management's position, Parker said in a conference call with analysts.

Parker said in an interview Wednesday that Delta's creditors committee did not ask US Airways to raise its offer, but the panel indicated it was having a hard time making up its mind.

"They were struggling with a decision and the analysis of our proposal versus that of Delta's standalone proposal," Parker said. "We just wanted to make it a much, much easier analysis for them, and today we've done that."

Delta said in a statement Wednesday that its board will do its duty to review the revised offer by US Airways. But, the airline added, "On its face, 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 $1 billion (euro770 million)."

US Airways said the increased offer is set to expire on Feb. 1 unless creditors indicate support for the start of the due diligence process, which would open up Delta's books to US Airways. US Airways also wants Delta to postpone a Feb. 7 bankruptcy hearing involving its reorganization plan, and it wants the creditors committee to support both companies filing paperwork with the Justice Department that would start the regulatory process.

Parker said "the offer would go away in its entirety" if those conditions were not met.

"There's an offer on the table now and it would expire," Parker said.

Parker also suggested that at this point, US Airways is not too worried about Delta management's position.

"We would very much like to see Delta management begin to work with us and support this transaction, but that's not what this proposal is about," Parker said.

The increased bid includes 89.5 million shares of US Airways stock and $5 billion (euro3.85 billion) in cash. The original offer included 78.5 million shares of US Airways stock and $4 billion (euro3.08 billion) in cash.

Executives of Atlanta-based Delta have said they oppose a buyout by US Airways. The third-largest U.S. carrier has filed a reorganization plan that calls for it to emerge from bankruptcy by the middle of this year as a standalone company worth $9.4 billion (euro7.24 billion) to $12 billion (euro9.24 billion).

Based on the Delta's valuation method, US Airways estimated that its increased bid could actually be worth $12.7 billion (euro9.78 billion) to $15.4 billion (euro11.86 billion).

Despite the position by Delta management, Delta's unsecured creditors committee in its bankruptcy case will play a key role in deciding the airline's future course. The committee had said prior to Wednesday that it was reviewing both Delta's standalone plan and US Airways' buyout offer.

The Feb. 7 bankruptcy hearing would be to consider approval of Delta's disclosure statement relating to the carrier's standalone reorganization plan.

The disclosure statement includes details on Delta's operations. If the statement is approved, that means Delta can begin soliciting votes on its reorganization plan, which typically takes four to eight weeks.

Parker has said previously that if that hearing were to go forward it could increase the urgency of US Airways' bid because US Airways hopes to consummate its deal to buy Delta before Delta emerges from bankruptcy reorganization.

US Airways still has not said where a combined US Airways-Delta would be based. Parker said Wednesday no decision on that has been made.

Delta management has argued that the combination of US Airways and Delta would not receive regulatory approval because of the overlap of the two carriers' routes. US Airways says there wouldn't be any regulatory holdup. A Jan. 24 hearing has been scheduled by the Senate Committee on Commerce, Science and Transportation on the state of the airline industry and the potential impact of airline mergers.

Parker told analysts Wednesday there's any easy way to know who is right on the regulatory issues.

"Let's just go ask them and find out," Parker said of regulators.

Ray Neidl, an airline analyst with Calyon Securities in New York, said the increased offer will be more attractive to Delta's creditors, but at the end of the day the great unknown is whether regulators would approve the proposed merger.

"In my opinion, that's going to be the main thing," Neidl said, adding that he gives the US Airways bid a 50-50 chance of being successful.


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