United pursuing merger process
By Dave Carpenter
Associated Press
CHICAGO — United Airlines' parent company said yesterday it would obey the terms of its recently revoked offer to buy US Airways and pursue the buyout until federal regulators make a final ruling.
The move complies with a request by US Airways, but several industry experts said it is most certainly a legal maneuver rather than a change of heart by United.
UAL Corp. moved earlier this month to call off the $4.3 billion acquisition amid daunting economic and regulatory challenges, but US Airways is balking at the proposed separation.
Nevertheless, UAL said Thursday it will comply with US Airways' request to formally seek a decision by the DOJ on the 14-month-old proposal.
"In keeping with its obligations under the merger agreement, UAL Corporation will continue to pursue the transaction during this period and stands ready to address additional questions DOJ and the state attorneys general might have," the Elk Grove Village, Ill.-based company said. Spokesmen declined further comment.
The move means the deal can't be scuttled until August, following a required 21-day review period by the Justice Department. Under the terms of the deal, United is entitled to walk away Aug. 1, paying a $50 million breakup fee.
United reportedly had asked US Airways to allow it to pay just $50 million while abandoning the deal before that date.
Legal expert Bert Foer, president of the American Antitrust Institute, said the two sides were just "scuffling over the terms of disengagement" and likely the breakup costs.
"I would not think this move is intended to generate completion of the merger," he said. "There are too many signs that it's over."
The maneuvering comes as US Airways ponders its future in the wake of the merger's collapse. The airline's top executives said this week they have no intention of selling off their company piecemeal.
"As a result of its many discussions with DOJ since May of 2000," the UAL statement said, "UAL Corporation recently proposed to US Airways that the merger agreement be mutually terminated. US Airways has rejected this proposal and would like a formal response from the DOJ."
US Airways issued a similar statement from its Arlington, Va., headquarters, adding: "There is no assurance, however, that the transaction can be consummated."
Justice Department spokeswoman Gina Talamona said yesterday, "The department's Antitrust Division continues it thorough analysis of the United Airlines/US Airways transaction and remains ready to continue discussions with the parties to move its review towards a conclusion."
Even with the deal apparently on its last legs, at least one interested party is hopeful that it can be cobbled together again.
Robert Johnson, who would become chief executive of a new airline called DC Air, implored the Justice Department to approve the United-US Airways deal. The creation of DC Air, which would be partly owned by American Airlines, would be intended to satisfy regulators concerns about United's market share in the Washington area.
"I urge the Bush Administration to recognize this unique opportunity to bring about minority ownership in the nation's airline industry in the form of DCAir," said Johnson, founder of Black Entertainment Television and now chairman of BET Interactive LLC.
Under terms of the deal, United also would have taken on about $7 billion in US Airways' debt.
