American-US Air $11 bln merger gets board OK - sources

NEW YORK Thu Feb 14, 2013 7:47am IST

A plane passes in front of a full moon over New York City February 17, 2011. REUTERS/Eric Thayer

A plane passes in front of a full moon over New York City February 17, 2011.

Credit: Reuters/Eric Thayer

Stocks

   

NEW YORK (Reuters) - The boards of AMR Corp (AAMRQ.PK) and US Airways Group Inc LCC.N each met on Wednesday to approve a merger that would create the world's largest airline with an expected market value of around $11 billion, people familiar with the matter said.

The all-stock merger, which is set to be announced early on Thursday, would finalize the consolidation of legacy U.S. air carriers that helped put the industry on a more solid financial footing.

AMR's bankruptcy creditors will own 72 percent of the combined airline, which will do business under the American Airlines brand and be based in Fort Worth, Texas, the people said. US Airways shareholders will own the rest.

The board approval came after AMR's unsecured creditors committee, which includes all three of AMR's major unions, met earlier on Wednesday to approve a proposed merger agreement, the people said.

The merged company will have a board of 12 members: four from US Airways including its chief executive Doug Parker, three from AMR including chief executive Tom Horton and five to be designated by the AMR creditors, two of the people said.

That will shrink to 11 members in 2014 after Horton steps down following the combined company's first annual meeting, the person added. Parker becomes chief executive of the new airline.

AMR's unsecured creditors are expected to be made whole on their claims in the form of stock in the merged company and also get accrued interest, the people said. AMR's shareholders will get a small equity stake as well, they added.

All the sources asked not to be named because the matter was not public. US Airways declined to comment while AMR representatives could not be immediately reached for comment.

The deal comes more than 14 months after the bankrupt parent of American Airlines filed for bankruptcy in November 2011, and would mark the last combination of legacy U.S. carriers, following the Delta-Northwest and United-Continental mergers.

A tie-up with US Airways would create the world's top airline by passenger traffic and help American and US Air better compete with United Continental Holdings (UAL.N) and Delta Air Lines (DAL.N).

Some $11 billion valuation of the combined American-US Airways compares to the roughly $12.4 billion market capitalization for Delta, and $8.7 billion for United Continental. (Additiona reporting by Karen Jacobs, Writing by Ben Berkowitz; Editing by Bernard Orr and Andrew Hay)

REUTERS SHOWCASE

WTO Trade Deal

WTO Trade Deal

WTO clinches first global trade deal in its history  Full Article 

Kashmir Attack

Kashmir Attack

Ten dead in Kashmir's worst militant attack in more than a year  Read 

OPEC Meeting

OPEC Meeting

Saudis block OPEC output cut, oil price sinks further.  Full Article 

GDP, RBI Preview

GDP, RBI Preview

GDP growth set to weaken, business wants reforms more than rate cut  Full Article | Related Story 

Social Media

Social Media

Twitter to start tracking users' mobile apps  Full Article 

Jaitley to Rajan

Jaitley to Rajan

Jaitley likely to meet Rajan on Monday to urge rate cut  Full Article 

Banking Sector

Banking Sector

India moves to allow more businesses to offer basic financial services.  Full Article 

Forever21 in India

Forever21 in India

Forever21 sets sights on Indian cities, but please hold the hot pants  Full Article 

Japan Economy

Japan Economy

Japan inflation slows in October, output and spending show signs of recovery  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage