Delta to Purchase Western Airlines / for $860 Million

Article excerpt

LOS ANGELES - Western Airlines Inc., the subject of repeated takeover rumors in recent months, has agreed to be acquired by Delta Air Lines Inc. for $860 million.

It was the fourth giant airline merger announced over the past year and came against a background of intense competition in the deregulated air-travel industry, which has compelled large carriers to expand or risk losing business.

Los Angeles-based Western said its directors accepted an offer of $12.50 a share, half in cash and half in securities, from Atlanta-based Delta, which long has been rumored to be seeking another airline to strengthen its operations in the western United States.

Both Western and Delta serve Will Rogers World Airport in Oklahoma City.

According to August enplanement statistics for August at Will Rogers, Delta had 14,515 enplanements, or 10.17 percent of the market, third highest among the 14 airlines serving the local airport during the month. Western had 8,253 enplanements, or 5.7 percent or the market, sixth highest among the carriers at the local airport.

Analysts estimated the value of the offer at about $860 million, based on Western's 51.2 million common shares outstanding, plus more than 14 million convertible preferred shares and stock options.

After the announcement, Western's common stock jumped $1.50 a share to $11.67 1/2 in New York Stock Exchange composite trading, while Delta's stock closed unchanged at $42.12 1/2.

Delta and Western said their definitive merger agreement was subject to approval by both companies' stockholders and the Department of Transportation.

Delta operates 254 aircraft to 96 U.S. and foreign destinations, and its domestic routes are concentrated in the eastern United States. Western operates 89 jets to 67 airports, principally in the western United States, Canada and Mexico.

The newly merged company would become one of the nation's largest air carriers, along with United, American and Texas Air, which owns Continental and which has agreed to buy Eastern Airlines.

However, using the August enplanement figures for Will Rogers World Airport, the combined results for Delta and Western would not have improved Delta's placement among airlines at the local airport. …