UPDATE: SkyWest Agrees To $133 Million Deal For ExpressJet
August 04 2010 - 1:21PM
Dow Jones News
The consolidation of the U.S. airline industry continued
Wednesday as two of the largest regional carriers announced plans
to combine.
SkyWest Inc. (SKYW) agreed to pay $133 million in cash for
ExpressJet Holdings Inc. (XJT) in a move that marries the commuter
operations of merger partners Continental Airlines Inc. (CAL) and
UAL Corp.'s (UAUA) United Airlines.
The enlarged airline would have 696 planes and handle 50 million
passengers a year on some 4,000 daily flights.
The U.S. network airlines have sold or spun off almost all of
their regional business, subcontracting the flying to operators
like SkyWest, which plans to combine ExpressJet with the Atlantic
Southeast Airlines business it acquired from Delta Air Lines Inc.
(DAL) in 2005.
Brad Rich, SkyWest's chief financial officer, didn't rule out
further deals as the regional sector tries to handle pressure from
the majors to cut costs and improve efficiency.
ExpressJet turned down a $3.50-a-share takeover approach from
SkyWest in 2008, but accepted the new $6.75-a-share proposal. The
airlines hope to close the deal in the fourth quarter.
Rich said the new deal is completely different as it has reached
a new pact to fly on behalf of Continental that extends the
existing term and will ease its aircraft replacement plans.
The enlarged SkyWest will be the largest operator of jets made
by Embraer (EMBR3.BR) and Bombardier Inc. (BBD.A.T).
Rich said SkyWest aimed to combine the airlines within 12
months, and forecast a 45-50 cent boost to annual earnings from $60
million to $70 million in cost savings.
SkyWest also plans to diversify by investing $7 million for a
30% stake in Vietnamese start-up Mekong Air, providing four
regional jets and technical support.
ExpressJet shares recently doubled in price to $6.56, with
SkyWest up 1.1% at $12.55.
-By Doug Cameron, Dow Jones Newswires; 312-750-4135;
doug.cameron@dowjones.com
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