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AMR, US Airways To Merge In $11 Bln Deal


American Airlines' parent AMR Corp. (AAMRQ) and U.S. Airways Group, Inc. (LCC) have agreed to merge to create a global carrier that will have an implied combined equity value of about $11 billion, the two companies said Thursday. The deal will be significantly accretive to earnings of US Airways.

The boards of directors of both companies have unanimously approved the merger deal that will create the world's largest airline.

AMR and some of its subsidiaries, including American Airlines and American Eagle, filed for Chapter 11 bankruptcy protection in November 2011. In August 2012, AMR and US Airways entered into a non-disclosure agreement to evaluate a potential merger of American Airlines and US Airways.

Under the terms of the merger deal, US Airways stockholders will receive one share of common stock of the combined airline for each share of US Airways common stock held by them.

US Airways shareholders will own 28 percent of the combined company. The remaining 72 percent stake will be held by stakeholders of AMR and its debtor subsidiaries, American's labor unions, and current AMR employees.

The merged entity will operate under the American Airlines name and offer more than 6,700 daily flights to 336 destinations in 56 countries. The combined company has firm orders for more than 600 new mainline aircraft.

The merger is subject to approval by the U.S. Bankruptcy Court for the Southern District of New York, in addition to regulatory approvals as well as approval by US Airways shareholders. The combination is expected to be completed in the third quarter of 2013.

In connection with the merger deal, AMR has entered into a support agreement with certain unsecured creditors holding about $1.2 billion of prepetition unsecured claims against the debtors.

Both airlines expect that the regional carriers they own - AMR's American Eagle and US Airways' Piedmont and PSA - will continue to operate as distinct entities. The company will be headquartered in Dallas-Fort Worth, and will maintain a significant corporate and operational presence in Phoenix.

The companies expect the combination to deliver enhanced value to American Airlines stakeholders and to be significantly accretive to earnings per share for US Airways shareholders in 2014.

The transaction is expected to generate more than $1 billion in annual net synergies in 2015, including $900 million in network revenue synergies. The companies expect about $1.2 billion in one-time transition costs spread over the next three years.

Thomas Horton, chairman, president and chief executive officer of American Airlines, will serve as chairman of the combined airline's board of directors through its first annual meeting of shareholders. Horton will also serve as the combined airline's representative to the oneworld Alliance, of which he is currently chairman, and International Air Transport Association for the same duration.

Doug Parker, chairman and CEO of US Airways, will serve as CEO of the merged entity and also as a member of its board of directors. Parker will assume the additional position of chairman of the board following the conclusion of Horton's service.

The combined company's board of directors will initially be made up of twelve members. The board will be comprised of three American Airlines representatives, including Horton, four US Airways representatives, including Parker, and five AMR creditor representatives.

LCC closed Wednesday's trading at $14.66. In Thursday's pre-market, the stock is adding $0.15 or 1.02 percent to $14.81.

AAMRQ closed Wednesday's trading at $1.30, up $0.05 on a volume of 8.16 million shares.

by RTTNews Staff Writer

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