SkyWest, Inc. has signed a definitive merger agreement with ExpressJet Holdings – the parent company of regional and charter airline operator ExpressJet Airlines – for SkyWest to buy all of the outstanding common shares of ExpressJet for $6.75 per share in cash.
At the agreed price for ExpressJet’s shares, the merger is valued at $133 million. Should the merger be concluded, SkyWest, Inc. will own airlines that operate just under 700 aircraft – all but 48 of them jets – and SkyWest will be by far the biggest regional airline group in the world.
Today ExpressJet operates 244 aircraft, all of them Embraer ERJ-145s; SkyWest, Inc. subsidiary Atlantic Southeast Airlines operates 158, all of them from the Bombardier CRJ family; and SkyWest, Inc.’s other airline subsidiary SkyWest Airlines operates 294 aircraft, 246 of them from the Bombardier CRJ family and the remaining 48 of them being Embraer EMB.120ER Brasilia turboprops.
SkyWest says it intends to merge ExpressJet Airlines with SkyWest’s wholly owned subsidiary Atlantic Southeast Airlines following the closing of the transaction and receipt of all required regulatory approvals.
In a statement, SkyWest says SkyWest’s and ExpressJet’s boards of directors have unanimously approved the definitive merger agreement. The deal is not subject to financing conditions, but it is subject to receipt of regulatory approvals, approval by ExpressJet’s stockholders “and other customary conditions”, according to SkyWest. The parties expect the merger to close during the fourth quarter of 2010.
Upon completion of the merger, ExpressJet will become a wholly owned subsidiary of Atlantic Southeast Airlines. SkyWest intends to merge the operations of ExpressJet Airlines and Atlantic Southeast and use Atlantic Southeast’s existing facilities in Atlanta, Georgia as the operating headquarters of the combined company.
SkyWest says Atlantic Southeast Airlines has already 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. (Continental is currently ExpressJet’s biggest capacity-purchase client.)
The parties expect both airlines to continue to operate under separate airline operating certificates until the regulatory process can be completed for combining the airlines under a single operating certificate. SkyWest says that while the two airlines wait for the FAA to grant that single operating certificate, Atlantic Southeast intends to transition some of ExpressJet’s existing support functions to Atlantic Southeast and SkyWest upon the closing of the merger.
Atlantic Southeast and SkyWest believe that ExpressJet employees and passengers will benefit from the merger by building greater efficiencies of scale and capitalizing on growth opportunities, according to SkyWest.
“We are extremely pleased to reach this definitive merger agreement with ExpressJet and look forward to the consummation of the transaction,” says Bradford Rich, SkyWest, Inc.’s executive vice president and chief financial officer. “We also look forward to the integration of these two successful airlines and employee work groups and hope to create integration benefits that will solidify the long-term future of each of these airlines in a very competitive industry.”
Regarding the acquisition, George Bravante, chairman of the ExpressJet Board, says, “We believe this transaction provides a significant premium over ExpressJet’s current market price for its stockholders and that the combined airline will be able to provide a stable, platform for growth for ExpressJet employees after this transaction closes.”
ExpressJet says the parties expect the combined airline to maintain a significant operational presence in each of the hubs that ExpressJet currently serves, including Continental’s current hubs in Houston, Newark and Cleveland, as well as hubs in Chicago O’Hare and Washington Dulles for United Airlines. In addition, the companies expect that the vast majority of their front-line employee positions will not be impacted by the acquisition.
SkyWest and ExpressJet expect the combined airline to maintain an operational support structure in Houston, Texas, in addition to its corporate headquarters in Atlanta.
According to ExpressJet, the merger is not expected to result in material changes to the operating schedules, destinations or aircraft deployments of either airline.