US Airways Group today announced a hostile takeover bid for bankrupt Delta Air Lines, offering $8 billion in cash and stock for its larger rival.
US Airways, the sixth biggest US carrier, released a letter saying that it had brought up a potential tie-up with number-three airline Delta earlier this year but had been rebuffed. The letter proposed a merger of the two airlines upon Delta's emergence from bankruptcy.
US Airways, describing the deal as a merger, said that after completing the acquisition it would operate under the name of Delta, which is the better known internationally of the two airlines.
US banking giant Citigroup has pledged $7.2 billion in financing for the deal, according to the statement. This would refinance existing US Airways debt and provide $4 billion in cash for the takeover.
In a letter to Delta CEO Gerald Grinstein, US Airways CEO Doug Parker wrote that he was 'disappointed' his counterpart had declined to meet to address a potential merger discussed in private last spring.
Parker revealed that he had followed up the spring meeting with a letter in late September 'describing the significant benefits that could be achieved for both of our respective stakeholder groups from this type of transaction.'
The proposal comes as the US airline industry is struggling to emerge from possibly its worst-ever slump, resulting from the downturn in air travel after the September 11, 2001 terror attacks and worsened by surging fuel costs.
The older airlines are also fighting competition from low-cost airlines that do not have so-called legacy costs such as hefty pension liabilities. Delta and another major carrier, Northwest, are in bankruptcy.
United Airlines, the second-largest US carrier, emerged from bankruptcy protection in February. US Airways, under its old ownership, has been in bankruptcy protection twice in recent years.
The current US Airways emerged from bankruptcy protection in September 2005 as part of a deal that merged the old company with low-cost carrier America West.
