US Airways today halted its hostile takeover bid of Delta Air Lines, following news this morning that Delta's creditor committee rejected the offer. The move came after a week in which the U.S. Senate greeted the proposed merger with skepticism, Delta moved forward with its plan to emerge from Chapter 11 as a stand-alone carrier by securing $2.5 billion in exit financing and analysts downplayed the possibility of a successful bid.
In a statement released today, Delta's Official Committee of Unsecured Creditors threw its support behind the reorganization plan Delta submitted as the alternative to a US Airways acquisition. "The Creditors' Committee reached this determination after engaging in extensive discussions with representatives of Delta and US Airways over the last two months and upon consideration of the advice of the Creditors' Committee's legal, financial and industry advisors," the committee said in the statement.
"It is now clear that there will not be an opportunity with the Committee to move forward in a timely or productive manner and as a result, we have withdrawn our offer," US Airways CEO Doug Parker said in a statement today.
US Airways this month upped its bid for Delta by about $2 billion, noting that the revised offer would expire Feb. 1 to build in a "sense of urgency," Parker said this month
(BTN, Jan. 22). Parker said if creditors supported the deal, Delta's management would follow.
While industry experts viewed US Airways' bid for Delta as the linchpin for further industry consolidation, Calyon Securities analyst Ray Neidl in a research note today said the prospects of another merger remain likely. "If US Airways fails in this attempt, we would expect the airline to attempt another takeover in the next 12 months—of Delta or another airline—since the management team at US Airways is aggressive and realizes that the carrier needs more market mass if it is to be a long-term survivor, in our opinion," Neidl said.
Parker yesterday during US Airways' annual earnings call would not comment on whether US Airways once again would increase its offer for Delta if creditors would not give the nod by Thursday's deadline—as sources have suggested the carrier would do. "There's been speculation from an educated group of bondholders that there might be a higher bid than that. We're not commenting on that speculation," Parker said. He added that US Airways sees little value in merging with Delta after it emerges from bankruptcy.