US Airways gets Morgan Stanley into its hostile bid for Delta
US Airways Group has strengthened the financial muscle behind its hostile bid for bankrupt Delta Air Lines, adding Morgan Stanley as a lead financial backer alongside Citigroup. (1/10/2007)
The move, which comes after Delta rejected US Airways’ $8.7 billion takeover offer last month, could pave the way for US Airways to raise its bid.
The inclusion of Morgan Stanley paves the way for more financial institutions to join in the merger. Derek Kerr, US Airways chief financial officer said, “These two world-class firms, combined with the possibility for a third firm, reinforce the financial community’s confidence in the value creation of our proposed merger with Delta.”
“If US Airways eventually concludes they want to up their bid, Morgan provides a lot more capacity to do that,” airline consultant Robert Mann said, according to Reuters. “I think it’s a hint that they’re looking to reinforce if they need to.”
The airline shared that Morgan Stanley would join Citigroup as joint underwriter for the proposed offer, which is being reviewed by Delta’s creditors alongside a stand-alone restructuring plan from the Atlanta-based airline. As per the information available, US Airways has maintained it will not increase the cash-and-stock offer outlined last October, but said in a statement that the $US7.3 billion financing commitment had also been revised to provide significantly improved financial terms.
Delta is reviewing bids to provide it with funding to exit more than 18 months of bankruptcy protection in the second quarter of 2007. The US Airways announcement comes amid pressure on US 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 traditionally weak fourth calendar quarter, according to media.