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May 3, 2010 - Continental and United today announced a merger agreement, creating the world's leading airline with superior service to customers, expanded access to an unparalleled global network serving 370 destinations around the world, enhanced long-term career prospects for employees, and a platform for improved profitability and sustainable long-term value for shareholders. The all-stock
merger of equals brings together two of the world's premier airlines,
creating a combined company well positioned to succeed in an
increasingly competitive global and domestic aviation industry. Glenn Tilton, chairman, president and chief executive officer of UAL Corp., will serve as non-executive chairman of the combined company's Board of Directors through December 31, 2012 or the second anniversary of closing, whichever is later. |
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Jeff Smisek,
Continental's chairman, president and chief executive officer, will be
chief executive officer and a member of the Board of Directors. He will
also become executive chairman of the Board upon Tilton's ceasing to be
non-executive chairman. The combined
organization will draw on the talented group of leaders from both
companies, and key management positions will be determined prior to the
transaction's closing. The combined company's management team is
expected to include an equitable and balanced selection of executives
from each company with the intention that each company will contribute
roughly equal numbers. In addition to Smisek and Tilton, the 16-member
Board of Directors will include six independent directors from each of
the two companies and two union directors required by United's charter. The holding
company for the new entity will be named United Continental Holdings,
Inc. and the name of the airline will be United Airlines. The marketing
brand will be a combination of the brands of both companies. Aircraft
will have the Continental livery, logo and colors with the United name,
and the announcement campaign slogan will be "Let's Fly Together." The
new company's corporate and operational headquarters will be in |
Tilton said,
"Today is a great day for our customers, our employees, our shareholders
and our communities as we bring together our two companies in a merger
of equals to create a world-class and truly global airline with an
unparalleled network serving communities worldwide with outstanding
customer service. Building on our Star Alliance partnership, we are
creating a stronger, more efficient airline, both operationally and
financially, better positioned to succeed in a dynamic and highly
competitive global aviation industry. This combination will provide a
strong platform for sustainable, long-term value for shareholders,
opportunities for employees, and more and better scheduled service and
destinations for customers. Knowing and respecting our colleagues at
Continental as we do, we are confident that together we can compete
successfully in what is now, clearly, a global marketplace." Smisek said,
"This combination brings together the best of both organizations and
cultures to create a world-class airline with tremendous and enduring
strengths. Together, we will have the financial strength necessary to
make critical investments to continue to improve our products and
services and to achieve and sustain profitability. We have forged a
highly collaborative partnership with United over the past two years as
we prepared for and executed a seamless transition to Star Alliance, an
important achievement that gave us valuable experience in working
together and built mutual respect between our two companies. I look
forward to working with the employees of both companies around the
world, so our airline can become an even stronger global competitor,
deliver sustainable profitability, achieve best-in-class customer
service under our unified brand, create long-term career opportunities
and deliver increased value for shareholders." The combination
of United and Continental brings together the two most complementary
networks of any Employees will
benefit from improved long-term career opportunities and enhanced job
stability by being part of a larger, financially stronger and more
geographically diverse carrier that is better able to compete
successfully in the global marketplace. The companies believe the effect
of the merger on front-line employees will be minimal, with reductions
coming principally from retirements, attrition and voluntary programs.
The company will provide employees with performance-based incentive
compensation programs focused on achieving common goals. The combined
company will be focused on creating cooperative labor relations,
including negotiating contracts with collective bargaining units that
are fair to the company and fair to the employee. On a pro forma
basis, the combined company would have annual revenues of approximately
$29 billion based on 2009 financial results, and an unrestricted cash
balance of approximately $7.4 billion as of the end of first quarter
2010, including United's recently closed financing transaction. In the merger,
Continental shareholders will receive 1.05 shares of United common stock
for each Continental common share they own. United shareholders would
own approximately 55% of the equity of the combined company and
Continental shareholders would own approximately 45%, including
in-the-money convertible securities on an as-converted basis. The merger is
expected to deliver $1.0 billion to $1.2 billion in net annual synergies
by 2013, including between $800 million and $900 million of incremental
annual revenues, in large part from expanded customer options resulting
from the greater scope and scale of the network, and additional
international service enabled by the broader network of the combined
carrier. Expected synergies are in addition to the significant benefits
derived from the companies' existing alliance and expected from their
future joint venture relationships. The combined company is also
expected to realize between $200 million and $300 million of net cost
synergies on a run-rate basis by 2013. One-time costs related to the
transaction are expected to total approximately $1.2 billion spread over
a three-year period. The combined
airline will have the most modern, fuel-efficient fleet (adjusted for
cabin mix) and the best new aircraft order book among major The merger will
create the industry's leading frequent flyer program, offering vast
opportunities for customers to earn and redeem miles, including on Star
Alliance partners. United and
Continental are members of Star Alliance, the world's largest airline
network. Star The merger,
which has been approved unanimously by the Boards of Directors of both
companies, is conditioned on approval by the shareholders of both
companies, receipt of regulatory clearance, and customary closing
conditions. The companies expect to complete the transaction in the
fourth quarter of 2010. During the period between signing and closing of
the merger, the CEOs of both companies will lead a transition team,
which will develop a specific integration plan. J.P. Morgan
Securities Inc. and Goldman, Sachs & Co. acted as financial advisors and
provided fairness opinions to United, and Lazard and Morgan Stanley
acted as financial advisors and provided fairness opinions to
Continental. Jones Day, Vinson & Elkins LLP, and Freshfields Bruckhaus
Deringer LLP acted as legal advisors to Continental, and Cravath, Swaine
& Moore LLP acted as legal advisor to United. Continental
Airlines is the world's fifth largest airline. Continental, together
with Continental Express and Continental Connection, has more than 2,700
daily departures throughout the Continental
consistently earns awards and critical acclaim for both its operation
and its corporate culture. For nine consecutive years, FORTUNE magazine
has ranked Continental as the top United
Airlines, a wholly-owned subsidiary of UAL Corporation (NASDAQ: UAUA) ,
operates approximately 3,400* flights a day on United and United Express
to more than 230 U.S. domestic and international destinations from its
hubs in Los Angeles, San Francisco, Denver, Chicago and Washington, D.C.
With key global air rights in the Asia-Pacific region, Europe and Latin
America, United is one of the largest international carriers based in
the |
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