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News > Deals
Last push for US Air deal
July 12, 2001: 12:14 p.m. ET

UAL, US Air make final request for approval of all-but-dead deal
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - United Airlines and US Airways Group Inc. formally asked federal regulators for a decision on their proposed merger, a move seen as the last step before pulling the plug on the all-but-dead $4.3 billion acquisition.

The statement from United parent UAL Corp. (UAL: up $0.56 to $35.12, Research, Estimates) acknowledged that it is seeking to terminate its purchase of US Airways (U: up $0.73 to $17.07, Research, Estimates)  due to regulators' reluctance to approve the deal, and that US Airways has rejected UAL's proposal to terminate the deal.

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Since there has been no formal decision by the Department of Justice on the proposed deal, the two airlines made a final request for one. The regulators have 21 days to provide their decision.

The two carriers are bound by the merger agreement to pursue the deal until Aug. 1. After that, either side can walk away, but UAL would owe US Airways at least $50 million if it does so.

"In keeping with its obligations under the merger agreement, UAL Corp. will continue to pursue the transaction during this period and stands ready to address additional questions DOJ and state attorneys general might have," UAL's statement said.

One airline analyst who spoke on the condition that his name not be used said that there had been a risk that US Airways might sue UAL for breach of contract, and that he sees UAL's action as protection against that.

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The analyst pointed to the court battled between Tyson Foods Inc. (TSN: down $0.26 to $9.62, Research, Estimates) and IBP Inc. (IBP: down $0.28 to $25.72, Research, Estimates) that resulted in a judge ruling that Tyson must resume its $3.2 billion purchase of the meatpacker almost three months after it called off the deal due to questions about IBP's finances.

"We had Tyson-IBP case that went badly. That increases the possibility of a lawsuit," the analyst said. He also believes there is a chance UAL may yet try to purchase some of US Airways' assets for a lower price, even though the original deal did not work out.

US Airways executives said Tuesday they had no intention of recommending a break-up of the airline, even though they previously had said the carrier is not well positioned to survive as an independent airline. But the analyst said that is probably as much negotiating position as anything.

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"If United is going to come back for a second pass, US Airways doesn't want to appear to be a willing seller," the analyst said. "The price is going to come down anyway. It's not going to be the same terms, same sets of assets. But I think United still wants something to fill in its East Coast route network." graphic

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.