UAL Nixes US Airways "Merger" - WSJ
July 1, 2001
United Airlines Drops Its Plans
For Controversial US Air Acquisition
By SUSAN CAREY
Staff Reporter of THE WALL STREET JOURNAL
CHICAGO -- UAL Corp.'s United Airlines is walking away from its controversial plan to acquire US Airways Group Inc., because of regulatory resistance and the worsening economy, people familiar with the matter said.
After a meeting of UAL directors last week, United told US Airways it wants to discuss terminating their agreement prior to the Aug. 1 walkaway date. At that time, United can unilaterally drop the deal and pay US Airways a $50 million breakup fee. It wasn't clear today whether an early termination would be accepted by US Airways or whether the carrier might sue United.
US Airways declined to comment Sunday, as did United. AMR Corp.'s American Airlines, which was brought into the transaction in January as a buyer of some $1.2 billion of US Airways assets, couldn't immediately be reached.
People familiar with United said the nation's second-largest airline has become convinced in recent days that its merger never will win the approval of the Justice Department. "It doesn't seem like there's any hope of getting it done," said one person. Moreover, the prospect of a costly, complicated merger in the weak economy is increasingly unattractive, these people said.
United explored many ways to restructure the deal to win approval, one person said. But nothing seemed to do the trick and Justice Department lawyers continued to be concerned about concentration of market power in Washington and other markets.
There had been some thinking that United wanted to reprice the deal, which would pay US Airways shareholders $60 a share, a sum almost three times the stock's current price. But people familiar with United said the company isn't trying to negotiate a new price, but is "walking away" from the transaction, which has provoked noisy opposition since it was announced in May 2000.