US Airways raised its takeover offer for larger, bankrupt rival Delta Air Lines by 20 per cent to $10.2 billion today, sweetening a deal for creditors and putting pressure on Delta management.
The increased offer came after Delta rejected the original bid, valued at $8.5 billion yesterday's market close, saying it was worth more as an independent carrier. After making its original bid in November, US Airways' efforts to acquire Delta had stalled with little sign of support from creditors and Delta pushing ahead with its stand-alone plan.
"Since our original proposal was presented, we have been in continual dialogue with Delta's creditors and other interested parties and based on that feedback, we believe taking steps to increase our offer will help move this process forward," said US Airways chief executive Doug Parker in a message to employees.
A raised bid was expected after US Airways on Monday bolstered the financial muscle behind its bid by adding Morgan Stanley as a financial backer alongside Citigroup. The two banks have committed $8.2 billion in financing for the offer, $1 billion more debt than the original offer.
The new bid offers Delta's creditors $5 billion in cash and 89.5 million US Airways shares. The original offer, which was made in November and rejected by Delta last month, was for $4 billion and 78.5 million US Airways shares.
"We welcome US Airways' move and intend to carefully analyze this over the next several days," a person close to the unofficial creditor group said.
US Airways said the offer would expire on February 1st unless it gets support from Delta's creditors to perform due diligence and postpone a February 7th hearing that would start the voting process on Delta's stand-alone plan.
US Airways expects the acquisition of the larger Atlanta-based carrier to be accretive to earnings per share in the first full year after completion.
Delta and its official committee of unsecured creditors weren't immediately available for comment.