SkyWest's Atlantic Southeast Airlines to acquire ExpressJet Holdings

SkyWest entered (04-Aug-2010) into a definitive merger agreement with ExpressJet Holdings, whereby Atlantic Southeast Airlines, SkyWest's wholly owned subsidiary, will acquire all of the outstanding shares of common stock of ExpressJet for USD6.75/share in cash, representing a net purchase price of approximately USD133 million after giving effect for shares already owned by Atlantic Southeast. Details include:

• Approvals: The merger agreement has been unanimously approved by the SkyWest and ExpressJet boards. The transaction is not subject to financing conditions but is subject to receipt of certain regulatory approvals, approval of ExpressJet stockholders and other customary conditions. The parties currently anticipate that the transaction will close during 4Q2010;
• Continental Airlines agreement: Atlantic Southeast has negotiated the principal terms of a new, long-term, capacity purchase agreement with Continental Airlines, which is intended to become effective upon consummation of the ExpressJet merger;
• Ownership structure: Upon completion of the merger, ExpressJet will become a wholly owned subsidiary of Atlantic Southeast, with the intention of combining their operations and utilising Southeast's facilities in Atlanta as the operating headquarters of the combined company;
• Branding: The parties anticipate the airlines will continue to operate under separate airline operating certificates until the regulatory process can be completed for combining them under a single certificate;
• Efficiencies of scale: Atlantic Southeast and SkyWest believe that ExpressJet employees and passengers will benefit from the merger by building greater efficiencies and capitalising on growth opportunities;
• Network: It is anticipated that the combined airline will maintain significant operational presence in each of the hubs ExpressJet currently serves, including Continental's current hubs in Houston, Newark/New York and Cleveland, as well as hubs in Chicago O'Hare and Washington Dulles for United Airlines;
• Headquarters: It is anticipated that the combined airline will maintain an operational support structure in Houston while corporate headquarters will be in Atlanta;
• Employees: It is expected that the "vast majority" of front-line employee positions will not be impacted by the acquisition;
• Impact on passengers: The transaction is "not expected" to result in material changes to operating schedules, destinations served or aircraft deployment of either airline;
• Advisors: SkyWest utilised Raymond James & Associates as investment bankers and the services of Parr Brown Gee and Loveless as its legal advisors. ExpressJet engaged Goldman Sachs & Co as its primary financial advisor, and Seabury Securities LLC, Abrams & Bayliss LLP and Andrews Kurth LLP, as its legal advisors.;
• Union response: The International Association of Machinists and Aerospace Workers (IAM) stated: "It is not a surprise that the merger-mania roiling the major airlines is spreading to regional carriers. The lack of any appreciable regulation in the airline industry ensures that carriers large and small will continue to tear each other down and exacerbate their failure to serve passengers, employees and communities," adding that it will work to "protect our ExpressJet Flight Attendants and defend their contract if this merger with Atlantic Southeast Airlines goes forward". Meanwhile, the Air Line Pilots Associations (ALPA) stated it would review and evaluate the plan, adding: "Every transaction presents opportunities and risks. We need to review and evaluate the plan for the combined airline before we can commit to taking a position to support or oppose the sale/merger. What I can state unequivocally is that, just as airline mergers over the past few years have shown us, it will take pilot involvement and support to realise any true measure of success for this or any transaction";
• Investigations: Kendall Law Group and Levi & Korsinsky separately stated it is investigating the move for shareholders, to determine whether ExpressJet and its Board breached their fiduciary duties by entering into the agreement. [more - Skywest] [more - ExpressJet] [more - International Association of Machinists and Aerospace Workers] [more - Air Line Pilots Association] [more - Kendall Law Group] [more - Levi and Korsinsky]