If you want to know all the back and forth between American Airlines and US Airways during their merger negotiations in the past year, the Securities and Exchange Commission filing made on Thursday provides a day-by-day timeline.
As early as April 2011, US Airways board of directors considered making a merger offer to American Airlines.
According
to the filing, US Airways senior management presented an analysis
of a possible merger with American at its board meeting in April 2011.
Horton
then approached Parker at an industry event in September to discuss a
possible combination, although Horton said the two companies should
speak after American secured new labor contracts.
In October, AMR
chief executive Gerard Arpey encouraged US Airways to leave United
Continental's Star Alliance and join American's Oneworld alliance as an
"initial step" that could result in a deal later.
It wasn't until
after AMR filed for bankruptcy in November 2011 and Arpey resigned that
the two parties began serious negotiations, although AMR approached
other airlines to gauge their interest in a merger last summer.
After months of negotiations in the fall, the two carriers announced the merger in February.
Keep reading for the full timeline printed in the SEC filing.
-Andrea Ahles
From the S-4 registration filing
To
that end, on April 14, 2011, at the regularly scheduled meeting of the US
Airways Group board, senior management of US Airways Group presented an
analysis of a potential combination with AMR. Following a discussion, the US
Airways Group board instructed management to continue its evaluation of that
potential combination, which management did throughout the remainder of 2011.
On
September 7, 2011, Mr. Thomas W. Horton, then president of AMR, approached Mr.
W. Douglas Parker, US Airways Group’s chairman and CEO, at an industry event.
Mr. Horton explained that AMR had recently completed the then-largest ever
order of new aircraft and that upon entering into new labor agreements AMR
might soon be positioned to engage in discussions about strategic alternatives,
including a combination with US Airways Group. Mr. Parker agreed that a
combination of the two airlines could be beneficial to both parties, and that
the two should speak again after AMR had secured new labor agreements.
In
an October 2011 telephone conversation, Mr. Gerard J. Arpey, then AMR’s
chairman and CEO, told Mr. Parker that he was aware of the earlier discussion
between Mr. Horton and Mr. Parker. Mr. Arpey said that once AMR had achieved
new labor contracts, he would be open to discussing potential strategic
transactions. However, he encouraged Mr. Parker to consider the possibility of
US Airways departing the Star Alliance and becoming a member of the oneworld
alliance as an initial step, but one that might result in a larger transaction
sometime in the future.
On
November 29, 2011, and after exhaustive attempts to reach consensual agreements
with its labor unions and otherwise bring its labor costs in line with those of
its competitors, AMR and certain of its domestic subsidiaries filed for relief
under Chapter 11. That day, Mr. Horton, who had been elected chairman and CEO
of AMR on the eve of AMR’s Chapter 11 filing, reached out to other senior
airline executives, including Mr. Parker, to alert them to AMR’s filing.
On
December 21, 2011, Mr. Parker called Mr. Horton and asked if he and members of
his management team could meet with Mr. Horton to discuss a potential
combination. Mr. Horton said to Mr. Parker that while he believed a combination
could be beneficial to both companies and that he was always willing to talk,
AMR and its board of directors were completely focused on completing the
company’s restructuring.
On
January 12, 2012, Mr. Parker called Mr. Horton to inform him that US Airways
Group had engaged Millstein & Co., Barclays and Latham & Watkins LLP to
assist it in connection with an evaluation of options related to AMR’s Chapter
11 filing. Mr. Horton thanked Mr. Parker for the call but reaffirmed that AMR
was completely focused on completing its restructuring.
On
January 19, 2012, at a regularly scheduled meeting of the US Airways Group
board, Mr. Parker made a presentation on the impact of consolidation in the
airline industry and provided additional background on a potential combination
transaction with AMR.
In
early February 2012, Mr. Horton called Mr. Parker. Mr. Horton said he
understood that representatives of US Airways Group had begun reaching out to
AMR’s stakeholders regarding a potential transaction. Mr. Horton said that such
discussions were best left until after AMR had completed its restructuring.
On
February 14, 2012, Mr. Parker provided an update to the US Airways Group board
with respect to the evaluation of a potential combination transaction with AMR,
including his recent conversation with Mr. Horton.
On
March 9, 2012, representatives of US Airways Group and its advisers met with
the UCC’s Advisers to discuss the benefits of a combination of AMR and US
Airways Group, and to present preliminary estimates of revenue and cost
synergies and one-time transition costs associated with a potential
transaction.
On
March 30, 2012, the US Airways Group board again met to discuss a potential
merger with AMR. At the meeting, senior management reviewed recent developments,
including the meeting with the UCC’s Advisers. Senior management also presented
the strategic rationale for a combination with AMR, and discussed their
assessment of AMR’s other strategic alternatives. In addition, preliminary
estimates of revenue and cost synergies and one-time transition costs were
reviewed. Advisers to US Airways Group also reviewed the status of the Chapter
11 Cases, including the filing of Section 1113 motions by AMR to reject its
CBAs, and likely next steps in the Chapter 11 Cases. Senior management
discussed potential next steps, which included engaging in discussions with
representatives for AMR’s principal labor unions and continuing discussions
with the UCC’s Advisers.
In
early April 2012, US Airways Group commenced discussions with APA, APFA, and
TWU on the terms of a CLA, which would become effective only upon a business
combination of US Airways Group and AMR while AMR was in Chapter 11.
On
April 6, 2012, the US Airways Group board met and received updates on the discussions
with representatives of AMR’s principal labor unions and of upcoming
discussions with the UCC’s Advisers. In addition, US Airways Group’s financial
advisers presented a preliminary financial analysis of a potential combination
transaction, including preliminary relative valuations of AMR and US Airways
Group.
On
April 9, 2012, the financial advisers to US Airways Group met with the UCC’s
Advisers to discuss a potential merger between AMR and US Airways Group, review
preliminary relative valuation analyses, and review the status of discussions
between US Airways Group and representatives of AMR’s principal labor unions.
At a regularly scheduled meeting on April 12, 2012,
the US Airways Group board received an update on the status of discussions
relating to a potential merger. US Airways Group’s legal counsel reviewed with
the directors their fiduciary duties and other legal matters in connection with
considering a potential combination transaction with AMR. Senior management
reviewed with the directors the status of discussions with the representatives
of AMR’s principal labor unions, the terms of potential CLAs with each of those
unions, and the effects of the CLAs on revenue and cost synergies and labor
cost estimates in connection with a potential combination. Following the
presentation and discussion, US Airways Group’s board authorized management to
enter into the CLAs. Advisers to US Airways Group then reviewed with the board
their prior discussions with the UCC’s Advisers, revised preliminary valuation
analysis materials, and the terms of a potential merger proposal to AMR.
On
April 20, 2012, Mr. Parker called Mr. Horton to advise him that US Airways
Group would be sending AMR a non-binding indication of interest containing the
terms of a proposed merger (the April 20 Indication of Interest). The April 20
Indication of Interest contemplated AMR’s unsecured creditors receiving 49.9%
of the common stock of the combined company and $1.5 billion of new senior
unsecured debt obligations of the combined company and that US Airways Group
equity holders would retain 50.1% of the common stock of the combined company.
US Airways Group’s management and advisers estimated, based on then available
information, that the consideration offered to AMR’s unsecured creditors
represented 67% of the value of the combined company but US Airways did not
provide that estimate in the April 20 Indication of Interest and had no
discussions with AMR or its advisers on the April 20 Indication of Interest.
The April 20 Indication of Interest also proposed that the combined company
would fly under the American Airlines™ brand and would be headquartered in Ft. Worth, Texas.
Mr. Parker also advised Mr. Horton that US Airways Group had signed the CLAs
with APA, APFA, and TWU. Mr. Horton reiterated AMR’s focus on its
restructuring, but stated that AMR would review the April 20 Indication of
Interest. APA, APFA, TWU, and US Airways Group publicly announced these CLAs
the same day, and US Airways provided the April 20 Indication of Interest to
the UCC’s Advisers. Later that day, Mr. Horton discussed with the AMR board the
April 20 Indication of Interest and the substance of his conversation with Mr.
Parker.
Effective
May 1, 2012, AMR and the UCC entered into a Joint Exploration and Protocol
Agreement with respect to exploring consolidation opportunities on a
collaborative basis through December 28, 2012 (the Protocol). The Protocol also
provided that prior to December 1, 2012, AMR would not file a plan of
reorganization without the support of the UCC. AMR and the UCC’s Advisers
agreed that it was important that AMR continue to develop an independent plan
of emergence against which other alternatives could be evaluated.
On
May 15 and 16, 2012, AMR’s board, together with management and AMR’s legal
counsel and financial adviser, Weil, Gotshal & Manges LLP and Rothschild
Inc., further considered the April 20 Indication of Interest. AMR’s management
noted that AMR’s creditors would only be entitled to 49.9% of any synergies
produced by a combination based on the April 20 Indication of Interest, and
that the proposal valued AMR at less than the value indicated by AMR’s
independent emergence plan as then formulated. Accordingly, AMR’s board
determined that the April 20 Indication of Interest did not merit further
discussion. However, Mr. Horton explained that at a significantly different
equity split a combination with US Airways Group could be attractive to AMR and
its stakeholders.
On
June 14, 2012, at a regularly scheduled meeting, the US Airways Group board
received an update on a potential transaction with AMR from management and US
Airways Group’s advisers. The update included a review of the Chapter 11 Cases,
including efforts by AMR to reach consensual CBAs with its principal labor
unions, and a discussion of the view that the Section 1113 process would need
to be completed and consensual CBAs reached before progress could be made on a
merger. US Airways Group’s financial advisers also presented an updated
valuation analysis to the board.
On
July 10, 2012, AMR announced that, in cooperation with the UCC, it would begin
a review of strategic alternatives, including a potential merger.
Also on July 10, 2012, Mr. Horton and other senior
members of AMR’s management team made a presentation to the UCC regarding AMR’s
independent emergence plan, its process to consider strategic alternatives, and
the relative merits of a potential combination with various airlines, including
US Airways Group. Mr. Horton explained to the UCC that both he and AMR had long
been a proponent of industry consolidation, and that AMR had been evaluating
strategic alternatives, including possible combination transactions with a
number of airlines. Mr. Horton reiterated that the April 20 Indication of
Interest was insufficient and that the economics of a potential transaction
must reflect the relative size, value and prospects of each company, and that
any potential transaction would need to be measured against AMR’s independent
plan of emergence and/or other strategic alternatives. AMR’s board received an
update of this meeting later the same day.
On
July 17, 2012, AMR’s board received a further update on the July 10, 2012 UCC
meeting. Mr. Horton reviewed the various options available to AMR, including a
potential transaction with US Airways Group, and discussed the risks attendant
to any potential transaction. Mr. Horton also advised that he believed the time
had come to begin negotiating non-disclosure agreements with interested strategic
partners so that alternatives could be properly pursued.
On
July 19, 2012, at Mr. Horton’s request, Mr. Horton and Mr. Parker met to
discuss matters regarding AMR’s Chapter 11 emergence process, including the
prospect of a potential combination with US Airways Group. Mr. Horton informed
Mr. Parker that on his recommendation the AMR board had authorized the
establishment of a process to consider AMR’s strategic alternatives, including
exploring a possible combination with a number of airlines, among them US
Airways Group, and that the alternatives would be measured against AMR’s
independent emergence plan. Mr. Horton also advised that a form of
non-disclosure agreement would soon be made available to US Airways Group.
Effective
July 19, 2012, AMR and the UCC entered into a Joint Protocol Side Letter
Agreement, which modified and amended the Protocol and provided (i) the form of
non-disclosure agreement to be provided by AMR to potential counterparties,
including US Airways Group, and (ii) additional details regarding the
participation by the UCC in AMR’s process to identify and pursue strategic
alternatives (the Side Letter). The Side Letter was thereafter amended from
time to time to extend the joint collaboration period and the date prior to
which AMR would not file a plan of reorganization without the support of the
UCC.
Throughout
July and August 2012, in addition to discussions with US Airways Group, AMR and
its financial advisers approached several other airlines to gauge their
interest in a strategic combination. AMR also had discussions with potential
financial investors with experience in the airline industry to gauge their
interest in financially supporting an independent plan of emergence or other
investment. AMR’s board was periodically apprised of the status of these
potential alternatives.
On
July 24, 2012, US Airways Group’s board met and received an update on the
potential merger, including AMR’s recent announcement of its process to review
strategic alternatives, and the likely terms of a non-disclosure agreement US
Airways Group would be asked to enter into.
On
July 27, 2012, AMR provided drafts of proposed mutual non-disclosure agreements
to US Airways Group. During August 2012, AMR and US Airways Group engaged in
negotiations regarding the terms of these agreements, and the US Airways Group
board met on each of August 2, 2012 and August 30, 2012 to discuss the terms of
the proposed mutual non-disclosure agreements and related matters.
On
August 30, 2012, AMR and US Airways Group publicly announced that they had
executed mutual non-disclosure agreements in order to share information and
explore a potential transaction (the NDAs). The NDAs were thereafter amended
from time to time to permit certain disclosure to additional third parties and
to extend the termination date contained therein.
Throughout September and October of 2012, senior
management from AMR and US Airways Group and their respective advisers engaged
in substantial due diligence, both in person and telephonically, including
analysis of the companies’ respective internal business plans and financial
forecasts, and the potential revenue and cost synergies, one-time transition
costs, operational and integration risks, including labor costs, and legal
structuring. The parties spent significant time and effort attempting to
understand and reconcile material differences in their respective assumptions and
projection methodologies for potential revenue and cost synergies, one-time
transition costs, and labor costs in connection with a proposed merger. The
companies and their advisers also considered the operation of the CLAs and
other labor integration issues. The UCC’s Advisers actively participated in
these meetings, which they continued to do throughout the exploration and
negotiation of a potential transaction.
On
September 13, 2012, US Airways Group’s board received updates from management
and US Airways Group’s advisers on the due diligence efforts taking place in
connection with a potential merger.
On
September 18-19, 2012, AMR’s board met to review the status of discussions with
US Airways Group and AMR’s progress in its restructuring, including the
development of AMR’s independent emergence plan. Mr. Horton discussed the
opportunities and challenges attendant to a potential merger, and advised that
while he could not recommend a transaction based on the terms contained in the
April 20 Indication of Interest, a merger based on more favorable economic
terms, and with an arrangement that mitigated potential labor costs and risks,
could create meaningful value for AMR’s stakeholders.
On
October 11, 2012, AMR’s board convened telephonically to receive updates on the
status of discussions with US Airways Group.
On
October 15, 2012, US Airways Group’s board received further updates on the due
diligence efforts in connection with a potential merger.
On
October 17, 2012, AMR’s board again convened telephonically to receive updates
on the status of discussions with US Airways Group.
On
October 22, 2012, AMR provided a draft merger agreement to US Airways Group to
serve as a basis for any merger proposal to be made by them.
On
each of October 24, 2012 and November 1, 2012, the board of directors of US
Airways Group met to consider the terms and conditions of a merger proposal to
be made to AMR. During the course of these meetings, the advisers to US Airways
Group made presentations on the terms and conditions of the proposal, including
the merger agreement, the fiduciary duties of the board in connection with a
potential combination transaction, a financial analysis with respect to
relative valuation of AMR and US Airways Group and other matters related to the
proposal, including the significant improvement in macro-economic factors
affecting the airline industry, since the US Airways Group proposal in April
2012. At the conclusion of the November 1, 2012 meeting, the board of directors
authorized management to make a proposal (the November Proposal), which
contemplated, among other things, an allocation of equity in the combined
company (the Equity Split) whereby AMR’s stakeholders would receive 70% of the
equity of the combined company, but no senior unsecured debt as contemplated by
the April 20 Indication of Interest, and US Airways Group’s stockholders would
own the remaining 30% of the combined company’s equity. This Equity Split was
subject to a number of conditions, including a limitation on AMR’s secured debt
at emergence and the elimination in the Chapter 11 Cases of AMR’s liability for
other post-employment benefits (OPEB). The November Proposal also provided that
the combined company would retain the American Airlines™ brand and
would have its headquarters in Fort
Worth, Texas. The
November Proposal provided that Mr. Parker would be chairman of the board and
CEO of the combined company, which would have an 11 member board, of which US
Airways Group would designate 5 of the directors.
On November 2, 2012, Mr. Parker contacted Mr. Horton
to present the November Proposal.
AMR’s
board reviewed the November Proposal later that day. Notwithstanding its
conclusion that the terms of the November Proposal were still insufficient and
that the attendant labor uncertainty created unacceptable risk, at Mr. Horton’s
urging the AMR board decided it was prudent to continue pursuing a potential
transaction with US Airways Group, but to set aside any discussions about
management or board composition until other aspects of a transaction were
resolved.
On
November 9, 2012, Mr. Horton and other senior members of AMR’s management team
met with the advisers to the Ad Hoc Committee to discuss a potential merger
with US Airways Group. Consistent with his recommendation to the AMR board, Mr.
Horton told this group that on the right terms a merger with US Airways Group
could create meaningful value for AMR’s stakeholders.
On
November 10, 2012, AMR’s board received presentations from AMR senior
management and AMR’s financial advisers and legal counsel regarding the
November Proposal. Mr. Horton provided AMR’s board with a report on the status
of discussions and negotiations between AMR and US Airways Group. AMR’s board
also received updates on preliminary estimates of potential revenue and cost
synergies, one-time transition costs and potential labor costs. At the conclusion
of this meeting, and on Mr. Horton’s recommendation, AMR’s board expressed its
general support for a potential transaction, but instructed Mr. Horton to
inform Mr. Parker that uncertainty surrounding the combined company’s labor
costs rendered it difficult to determine the right Equity Split, which AMR’s
board believed needed to be in excess of 80%, and that these matters had to be
addressed if discussions were to continue.
On
November 12, 2012, representatives from AMR and US Airways Group met to discuss
the potential merger and related labor matters. At the conclusion of these
meetings, AMR’s advisers communicated that AMR believed that a merger with US
Airways Group could create meaningful value and should be pursued, but that
agreement needed to be reached on the Equity Split and that efforts should be
made to reduce the uncertainty of labor costs for the combined company. The
parties agreed to form the labor transition working group composed of
representatives of AMR, US Airways Group, and the UCC’s Advisers to better
understand the operation of the CLAs and to provide greater certainty regarding
the labor costs of a combined company. The parties also discussed extending the
term of the NDAs to allow those efforts to take place.
On
November 13, 2012, senior executives of US Airways Group and its advisers met
with advisers to the Ad Hoc Committee and gave presentations and engaged in
discussions on the strategic rationale for a merger with AMR, the network
advantages of the proposed combination, preliminary estimates of synergies and
one-time transition costs, US Airways Group’s assessment of AMR’s independent
emergence plan, valuation metrics, the terms of the November Proposal, and
other matters.
Later
that day, senior executives of US Airways Group and its advisers met with the
UCC. Mr. Parker and Mr. Scott Kirby, the President of US Airways Group, and
certain of US Airways Group’s advisers gave presentations on the strategic
rationale for a merger with AMR, the network advantages of the proposed combination,
preliminary estimates of synergies and one-time transition costs, US Airways
Group’s assessment of AMR’s independent emergence plan, valuation metrics, the
terms of the November Proposal, and other matters.
On
November 14, 2012, Mr. Horton met with the UCC and advised that the proposed
Equity Split for AMR’s stakeholders was insufficient and did not reflect the
relative value contribution of each company, and that labor risks, including
the magnitude of potential labor costs, needed to be adequately addressed. Mr.
Horton also restated his position that, on the right terms, and subject to a
satisfactory mitigation of labor risks, including the magnitude of labor costs,
a merger with US Airways Group could create meaningful value for AMR’s stakeholders.
Later on November 14, 2012, Mr. Horton called Mr.
Parker to indicate that the AMR board had expressed its general support for the
transaction. He explained, however, that AMR’s share of the Equity Split likely
needed to be above 80%, and that the uncertainty surrounding the combined
company’s labor costs needed to be mitigated.
On
November 15, 2012, at a regularly scheduled meeting, the US Airways Group board
reviewed the status of discussions between US Airways Group and AMR, and AMR’s
response to the November Proposal. The board also discussed management’s
concerns regarding AMR’s proposal to extend the NDAs beyond the then scheduled
November 30 expiry. After updates by senior executives of US Airways Group and
its advisers, and discussion, the board informed senior management that given
AMR’s views of an appropriate Equity Split as expressed in Mr. Horton’s
November 14, 2012 call to Mr. Parker, the board did not support amending the
NDAs as proposed by AMR and the UCC’s Advisers. In addition, the board
instructed management to inform AMR’s advisers that if the AMR board’s view of
an appropriate Equity Split was as communicated by Mr. Horton, then it was not
productive to continue discussions.
At
a meeting on November 16, 2012, Mr. Horton communicated to AMR’s board the
substance of the November 14, 2012 UCC meeting and his subsequent call with Mr.
Parker.
Between
November 16, 2012 and November 25, 2012, a series of conversations between
advisers to AMR, US Airways Group and the UCC occurred, which focused primarily
on AMR’s views of an appropriate Equity Split and whether there was a basis
upon which discussions between AMR and US Airways Group could continue.
On
November 25, 2012, Mr. Horton phoned Mr. Parker and suggested that further
discussions between the companies’ advisers regarding the proposed Equity Split
should be deferred. Mr. Horton further advised that that while he believed
there was likely a solution somewhere between the two parties’ respective
positions on the Equity Split, it was not possible for AMR to reach a final
conclusion on the Equity Split without first mitigating the potential labor
costs and risks attendant to a potential merger. Mr. Parker agreed that the two
parties should address the labor issues and make progress on negotiating the
merger agreement prior to revisiting the Equity Split.
On
November 27, 2012, AMR’s board received presentations and engaged in
discussions on various topics, including an update on the status of the
discussions and negotiations between AMR and US Airways Group and Mr. Horton’s
November 25, 2012 conversation with Mr. Parker. In addition, AMR’s advisers
explained that, dependent on AMR’s share of the Equity Split and subject to
satisfactory mitigation of labor costs and risks, the proposed merger could
likely result in a recovery for AMR’s equity holders.
On
November 28, 2012, US Airways Group’s board met and received a summary of
events since its last meeting. Senior management and advisers to US Airways
Group described a series of conversations that had taken place since the last
board meeting, including the November 25, 2012 conversation between Messrs.
Horton and Parker. Following a discussion of those conversations and other
matters, senior management recommended that US Airways Group amend the NDAs and
undertake efforts to provide greater certainty regarding the labor costs of a
combined company. The board concurred, and AMR and US Airways Group signed the
NDA extensions on November 29.
On
December 4, 2012, Mr. Horton met with the UCC regarding the status of the
merger.
Commencing
on December 4, 2012 and continuing through January 2013, the labor transition working
group engaged in negotiations with the APA and USAPA aimed at reconciling the
terms of the CLAs and the new American CBAs, and minimizing the potential labor
risks and costs typically associated with airline mergers and the integration
of employee work groups. As a result of those discussions, on December 29,
2012, American and US Airways announced a four-party MOU with APA and USAPA.
The labor transition working group also engaged in
discussions with the TWU and APFA during December 2012 and January 2013 in an
effort to further mitigate potential labor risks and costs associated with a
merger as to the work groups represented by those unions. Those discussions
resulted in a tri-party MOU among American, US Airways and TWU, along with a
related letter agreement among American, US Airways and APFA. Separately, US
Airways entered into a new CBA with the AFA that includes support for a merger.
On
December 19, 2012, AMR provided US Airways Group with an update to its internal
business plan and financial forecast, which the companies used to refine their
financial projections.
On
December 31, 2012, the US Airways Group board met to receive an update on the
potential merger, including the progress in discussions regarding labor
matters. The board also discussed a potential meeting with members of the Ad
Hoc Committee and the expected changes to the negotiation process assuming that
the Ad Hoc Committee became directly involved in the process.
On
January 8, 2013, Mr. Horton met with certain members of the Ad Hoc Committee to
discuss AMR’s restructuring and a summary of its review of a potential merger
with US Airways Group. Mr. Horton explained AMR’s process, and advised that he
continued to believe that a merger with US Airways Group could create
significant value for AMR’s stakeholders.
On
January 9, 2013, AMR’s board received further updates on the status of
discussions regarding the proposed merger with US Airways Group, including an
updated comparison of the value proposition for AMR’s stakeholders of an
independent emergence plan versus the proposed merger, and a review of the
material terms of the draft merger agreement.
On
January 10, 2013, representatives of US Airways Group’s senior management and
its financial advisers made a presentation to certain members of the Ad Hoc
Committee, which included the strategic rationale for a merger with AMR,
preliminary estimates of revenue and cost synergies, one-time transition costs,
labor integration plans, and the terms of the November Proposal.
On
January 15, 2013, Mr. Horton and AMR’s financial advisers made another
presentation to certain members of the Ad Hoc Committee regarding the economic
terms of the proposed transaction. The assembled group expressed their support
for a merger with US Airways Group, indicating that they did not want
disagreement over US Airways Group’s proposed 70/30 Equity Split to impede
reaching agreement on a transaction but that they supported Mr. Horton’s
efforts to improve the economics for AMR and its stakeholders.
Also
on January 15, 2013, Mr. Parker and the UCC’s legal counsel engaged in
discussions regarding the terms of the merger, including the merger
consideration and governance arrangements.
On
January 16, 2013, Mr. Horton communicated the substance of his January 15
meeting with the Ad Hoc Committee to the AMR board, where he again indicated
his belief that a merger with US Airways Group would be beneficial to AMR’s
stakeholders at the appropriate Equity Split.
On
January 17, 2013, at a regularly scheduled meeting, the US Airways Group board
received an update on the potential merger. US Airways Group senior management
reviewed the status of discussions, potential financing alternatives with
respect to US Airways Group’s existing debt, the development of retention plans
for non-union employees who did not have existing change of control agreements,
and considerations for a communications plan to be implemented upon
announcement of a merger with AMR. Also at this meeting, advisers to US Airways
Group provided a financial analysis of elements of a potential transaction, a
summary on antitrust and regulatory considerations, a review of the merger
agreement and the status of negotiations, an outline of the likely Chapter 11
process if a transaction were to be entered into, a review of the due diligence
process with respect to AMR, and a discussion of a potential shareholder rights
plan designed to protect the net operating loss position for federal income tax
purposes of the combined company in the event of a transaction.
On
January 23, 2013 Mr. Horton and AMR’s financial advisers again met with a group
of Ad Hoc Creditors to review the proposed terms of the merger.
On
January 24, 2013, Mr. Horton and Mr. Parker again met. Mr. Horton and Mr.
Parker discussed the proposed Equity Split and governance arrangements for a
combined company. At this meeting, Mr. Parker reiterated the key terms of the
November Proposal, including a 70/30 Equity Split. Mr. Horton again expressed
AMR’s view that this proposed Equity Split was insufficient. Mr. Horton also
informed Mr. Parker that, assuming a transaction, while he would support Mr.
Parker as CEO of the combined company, the AMR board believed that the
continued involvement of senior AMR executives and managers, including Mr. Horton
as chairman of the combined company’s board, was important.
Mr.
Horton and Mr. Parker also discussed the synergies and one-time transition
costs that were likely to result from a transaction and concluded that it was
reasonable to expect the proposed merger would generate more than $1 billion in
annual net synergies by 2015, and that a combined company would likely incur
approximately $1.2 billion in one-time transition costs.
On
January 25, 2013, the US Airways Group board met to receive an update on the
status of discussions. In the course of this meeting senior management and the
advisers to US Airways Group provided an overview of the status of the
negotiations, including Mr. Parker’s January 24 meeting with Mr. Horton.
Following the overview, the board discussed the status of negotiations and
provided guidance to senior management as to future negotiations.
On
January 27, 2013, by arrangement of Mr. Horton, Mr. Armando Codina, AMR’s lead
independent director, and Mr. Parker met to discuss the potential merger. Mr.
Codina repeated the AMR board’s belief that consolidation could benefit AMR and
US Airways Group, subject to the resolution of three matters. First, Mr. Codina
informed Mr. Parker that US Airways Group would need to improve upon the 70/30
Equity Split in order to receive the support of the AMR board for the merger.
Second, Mr. Codina advised that it was of paramount importance to AMR’s board
that the AMR’s existing equity receive a recovery in the Chapter 11 Cases. Mr.
Codina acknowledged that AMR would need to resolve this matter with its
creditors, but noted that an improved Equity Split would facilitate that
resolution. Finally, Mr. Codina explained that the combined company needed a
management structure that maximized the likelihood of full realization of the
Expected Synergies and a board composition that more closely reflected the
relative ownerships of AMR’s stakeholders and US Airways Group’s stockholders.
On
January 28, 2013, Mr. Horton and Mr. Parker had discussions on the merger’s proposed
Equity Split and governance arrangements. At the end of those discussions, Mr.
Parker informed Mr. Horton that US Airways Group was prepared to increase the
Equity Split to 72/28, subject to all the other terms of the November Proposal,
including that AMR’s OPEB liability would be extinguished as part of the
Chapter 11 Cases, and that US Airways Group was prepared to consider board
composition of the combined company that more closely reflected the relative
ownership of AMR’s stakeholders and US Airways Group’s stockholders. The
parties ultimately agreed that directors on the board of the combined company
be allocated so that AMR would designate three members (including Mr. Horton),
the UCC would designate five members, and US Airways Group’s would designate
four members (including Mr. Parker).
AMR’s
board also met on January 28, 2013 to review the status of the discussions and
negotiations, including Mr. Horton’s and Mr. Codina’s meetings with Mr. Parker,
the new proposed Equity Split and potential governance arrangements.
On
January 29 and 30, 2013, AMR and US Airways Group, along with their respective
financial advisers and legal counsel, together with UCC’s Advisers, met to
further discuss and negotiate the merger agreement and conduct due diligence on
AMR’s OPEB liability and its treatment in the Chapter 11 Cases. Thereafter, and
through February 13, 2013, legal counsel for AMR and US Airways Group continued
to exchange drafts of the merger agreement and engage in periodic telephonic
discussions and negotiations.
On
January 31, 2013, Mr. Parker and the UCC’s Legal Adviser discussed the proposed
governance structure of the combined company, and these parties then met in
person on February 5, 2013 to continue these discussions.
On
February 4, 2013, Mr. Parker called Mr. Codina and discussed the economic and
governance terms of the potential merger. Mr. Parker informed Mr. Codina that
US Airways Group was prepared to eliminate the requirement that AMR’s OPEB
liabilities be extinguished as part of the Chapter 11 Cases, subject to
reaching agreement on the Equity Split. Mr. Codina responded that under these
circumstances, and while he was not speaking for AMR or the AMR board, he was
prepared to support the merger if the Equity Split remained at 72/28. Mr.
Parker and Mr. Codina also discussed Mr. Horton being chairman of the board of
the combined company for limited period of time following the closing of the
merger.
On
February 5, 2013, Mr. Parker called Mr. Horton to communicate the terms upon
which US Airways Group was prepared to proceed with the transaction, and
advised that US Airways Group’s January 28, 2013 proposed 72/28 Equity Split
would no longer be subject to AMR’s elimination of the OPEB liabilities in
Chapter 11. Later that day, Mr. Parker emailed Mr. Horton to confirm these
proposed economics. Mr. Parker also proposed that Mr. Horton be chairman of the
board of the combined company, and that he serve in such role until the first
annual meeting, at which point Mr. Parker would be elected chairman and
continue as CEO.
Mr.
Horton responded to Mr. Parker’s February 5 communications in an email sent on
February 6, 2013. Mr. Horton explained that AMR had moved from its initial
proposed 80/20 Equity Split to a 75/25 Equity Split, but nevertheless he would
convey Mr. Parker’s new proposal to AMR’s board. With respect to governance,
Mr. Horton expressed his general agreement with Mr. Parker’s proposal but
reiterated that AMR board’s primary concern was a governance structure that was
most likely to ensure a successful integration and a full realization of the
Expected Synergies. Mr. Horton reminded Mr. Parker that AMR’s board still
wanted assurance that the combined company’s management would be drawn from the
“best of the best” of each company, and that he and Mr. Parker would be jointly
involved in selecting senior executives for the combined company.
On
February 7, 2013, Mr. Parker responded to Mr. Horton’s February 6 email,
informing Mr. Horton that he would consult with him in the selection of the
management team for the combined company.
On
February 11, 2013, Mr. Horton together with members of the AMR management team,
and Messrs. Parker and Kirby, met with the UCC as part of the UCC’s
deliberation of the potential transaction, which the UCC voted to support on
February 13.
On
February 12, 2013, Mr. Horton and Mr. Parker met to finalize the proposed
governance arrangements, and agreed that Mr. Parker would serve as CEO of the
combined company and would select the management team of the combined company,
consulting with Mr. Horton, and Mr. Horton would serve as chairman until the
earlier of (i) one year from the closing of the Merger and (ii) the combined
company’s first annual meeting, at which time Mr. Parker would become chairman.
On
the afternoon of February 13, 2013, AMR’s management, financial advisers and
legal counsel made presentations to AMR’s board regarding the Merger, including
that AMR’s stakeholders would be entitled to 72% of the Expected Synergies.
At
this meeting, after Mr. Horton recommended that the AMR board support the
Merger, Mr. Parker was asked to address AMR’s board. Mr. Parker expressed his
excitement and enthusiasm for the Merger, praised AMR’s brand, heritage and
people, and affirmed his belief that consolidation would position the combined
company to compete effectively with United and Delta. In response to questions,
Mr. Parker also briefly reviewed his preliminary views on integration of AMR
and US Airways Group, including his intention to select a management team for
the combined company from the “best of the best” personnel from each of AMR and
US Airways Group. Mr. Parker acknowledged that he and Mr. Horton would
collaborate on this process.
After Mr. Parker departed the meeting, AMR’s board
discussed extensively Mr. Parker’s presentation and the proposed transaction.
AMR’s board then voted unanimously to approve the Merger Agreement.
Later
that afternoon, the US Airways Group board met to consider the Merger. The
board received an update from senior management and US Airways Group’s
financial and legal advisers regarding the status of the potential merger. US
Airways Group’s legal advisers also reviewed with the directors their fiduciary
duties in connection with approving the proposed transaction, and reviewed the
terms of the Merger Agreement and a shareholder rights plan contemplated by the
Merger Agreement. In addition, senior management reviewed with the board the
communications plans for investors, employees, regulators, government
officials, and key commercial partners, and the terms of certain retention
plans to be adopted by the board covering non-union employees who did not have
existing change of control agreements. At the meeting, Barclays, US Airways
Group’s financial adviser, presented its financial analyses and rendered its
oral opinion to the US Airways Group’s board to the effect that, as of February
13, 2013, and based upon, and subject to the qualifications, limitations and
assumptions stated in its opinion, from a financial point of view, the
consideration to be received by the stockholders of US Airways Group in the
Merger was fair to the stockholders of US Airways Group. At the meeting,
Barclays also delivered its written opinion, dated February 13, 2013, which
stated the same. See the section entitled “The Merger—Opinion of US Airways
Group’s Financial Adviser” beginning on page 85. Following the presentation
from US Airways Group’s financial advisers, and after discussion and
consultation with its financial advisers and counsel, the US Airways Group
board determined that the Merger Agreement and the transactions contemplated
thereby, including the Merger, were advisable and in the best interests of, US
Airways Group and its stockholders, approved and adopted the Merger Agreement,
and recommended that the US Airways Group stockholders vote to adopt the Merger
Agreement. In addition, the board approved certain employee retention plans and
other matters related to the transaction.
Later
that evening, AMR and US Airways Group entered into the Merger Agreement and
AMR entered into the Support and Settlement Agreement with certain members of
the Ad Hoc Committee holding, in the aggregate, approximately $1.2 billion in
unsecured claims. The execution of the Support and Settlement Agreement (including
the finalization of a Plan term sheet, of which the Merger constitutes a
principal component) followed a period of negotiations that occurred
simultaneously with that of the Merger Agreement and, among other things,
resulted in the allocation of at least 3.5% of the combined company’s diluted
equity ownership to AMR’s existing equity holders. Pursuant to the Support and
Settlement Agreement, which is more fully discussed in the section entitled
“The Plan of Reorganization—The Support and Settlement Agreement” beginning on
page 142, the members of the Ad Hoc Committee party thereto agreed (among other
things), subject to the approval of the disclosure statement by the Bankruptcy
Court, to support and vote in favor of a plan of reorganization conforming to
the terms of the term sheet attached thereto.
AMR
and US Airways Group announced the execution of the Merger Agreement prior to
the opening of trading on the NYSE on February 14, 2013. Mr. Horton and Mr.
Parker held a press conference at DFW early that afternoon and then met with
employees of AMR. Later that day, Mr. Parker held a meeting with US Airways’
employees in Phoenix.
On
February 22, 2013, the Debtors filed a motion in the Bankruptcy Court seeking
approval of the Merger Agreement.
Read more here: http://www.star-telegram.com/2013/04/15/4777412/amr-files-bankruptcy-reorganization.html#storylink=cpy
Read more here: http://www.star-telegram.com/2013/04/15/4777412/amr-files-bankruptcy-reorganization.html#storylink=cpy
