XJT Rejects SKW's Takeover Bid

D

drl5555

New Member
Looks like the XJT/SKW rumors were right. XJT stock up over 50% on the news...

From CNNMoney:

HOUSTON, April 25 /PRNewswire-FirstCall/ -- ExpressJet Holdings, Inc. (NYSE: XJT) today announced that a Special Committee composed of independent outside members of its Board of Directors has unanimously rejected a proposal from SkyWest, Inc. (Nasdaq: SKYW) to acquire the Company for $3.50 per share in cash.

The Special Committee, which was formed to evaluate the SkyWest proposal, has commenced a full review of strategic and operational alternatives available to ExpressJet. The strategic review will include, among other options, immediately engaging in discussions with SkyWest and other potentially interested parties to evaluate a merger at a higher price, as well as entering into discussions with Continental Airlines, Inc. regarding a new capacity purchase agreement.

The Special Committee reached the decision to reject the SkyWest proposal after careful consideration, including a thorough review of the proposal with Goldman Sachs & Co., its independent financial advisor, and Abrams & Laster LLP, its independent legal advisor. In making its determination to reject the SkyWest proposal, the Special Committee considered a number of factors, including:

The Special Committee reaffirmed its confidence in management's ability to successfully execute the Company's current strategic plan. Pat Kelly, Chairman of the Special Committee, noted "The ExpressJet Board and management are committed to taking all appropriate and necessary actions to enhance value for ExpressJet stockholders. As the Special Committee reviews the strategic alternatives available to the Company, we have a solid management team and employees dedicated to providing our customers with exceptional service and conducting business as usual."

In making today's announcement, ExpressJet cautions its stockholders and others considering trading in its securities that there can be no assurance that any definitive offer will be made, any agreement will be executed, or any transaction will be approved or consummated. The Company does not intend to disclose developments relating to this review unless and until the Special Committee and its Board of Directors has approved a specific agreement or transaction.

Going forward, the Special Committee will work together with its financial and legal advisors to evaluate the Company's options and determine the course of action it believes is in the best interests of all ExpressJet stockholders.
 
Wait. Why the heck is Skywest looking to take on ANOTHER regional? I figured they'd be circling the wagons and battoning down the hatches to weather the storm.

They've already got one ALPA carrier under the umbrella that may need to get slung into the fold. Now they want one of the bigger ALPA groups, too? In a way, I kinda wish they would get XJT. Kinda gives you a hint on how an ALPA vote would eventually go over there.
 
kellwolf said:
Wait. Why the heck is Skywest looking to take on ANOTHER regional? I figured they'd be circling the wagons and battoning down the hatches to weather the storm.

They've already got one ALPA carrier under the umbrella that may need to get slung into the fold. Now they want one of the bigger ALPA groups, too? In a way, I kinda wish they would get XJT. Kinda gives you a hint on how an ALPA vote would eventually go over there.
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I for one was shocked when I heard SKW was trying to buy us out, and even more shocked when I realized it was a publically traded company (I thought it was privately owned). Talk about being out of the loop!

That being said, this puts pressure on management to get things done. Word is the primary investors at XJT are getting impatient and want to see results.

Branded out.
Renegotiate with CAL.
Get more flying for SouthernJets (that one would be hard since they're reducing capacity).
Try to find other carriers.
 
With the shareholders getting antsy, it's probably gonna be tough times ahead for XJT. Good luck guys.
 
kellwolf said:
Wait. Why the heck is Skywest looking to take on ANOTHER regional? I figured they'd be circling the wagons and battoning down the hatches to weather the storm.
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To pickup a contract with CAL. Plus at $181.0m it looks like they're shopping for a bargain.
 
This is probably a way of Skywest, Inc. protecting its flying in anticipation of UAL/CAL. I'd look for an offer in the $5/share range coming soon...
 
SkyWest wants CAL. Plain and simple. CAL has veto rights to any merger deal that may be presented to XJT. There's no doubt that SKYW has presented this deal with CAL's blessing.
 
In my head I can imagine SKYW guys hi fiving, "Cool, now we're going to own XJT!"

Now only if guys realized that the money being offered could have been in their pocket!!! Dummies! As pilots they have a really successful company and have absolutely nothing remarkable to show for it. Their compensation is mediocre.

The odd thing is I bet this gets more attention in their crew rooms than their own pay situation....Company making bank and pilots getting just enough to get by.
 
Every ASA pilot I've spoken too who have been here through the purchase of the company from SKW has had nothing but excellent things to say about Skywest Inc..

Along with nothing but praise for our President Brad Holt, especially with making the pilot group feel as if the things they had been suggesting prior to the purchase actually meant something as opposed to the previous leaders who only forced labor's throats open and #### down them.

So hey. . .Skywest Inc. has been good to ASA so far. We did finally get a contract negotiated, we finally had ACARS installed, finally having our performance data put into play through ACARS, and are making our performance numbers (D-0, A-14, etc) look real good due to that implementation.

I'm really not too sure of what to think about this one though. I hope XJT Management can figure it out and keep it on their own. I'd hate to see them being purchased by any company.
 
EX-99.2 3 xjt8k042408e992.htm EXPRESSJET HOLDINGS, INC. EXHIBIT 99.2
Exhibit 99.2​
[skywest, inc. logo]
Confidential
April 7, 2008​
Mr. James B. Ream
Chief Executive Officer and President
ExpressJet Holdings, Inc.
700 North Sam Houston Parkway, Suite 200
Houston, Texas 77067

Mr. George R. Bravante, Jr.
Chairman
ExpressJet Holdings, Inc.
700 North Sam Houston Parkway, Suite 200
Houston, Texas 77067

Dear Jim and George:
I enjoyed speaking with each of you by phone earlier today regarding this letter. On behalf of the Board of Directors of SkyWest, Inc., I am writing to express our interest in acquiring ExpressJet Holdings, Inc. (“ExpressJet”) and to make a proposal for such a transaction. This transaction would represent a compelling combination and excellent strategic fit for our companies, and create superior value for our respective stockholders.
We are prepared to acquire all of the outstanding shares of ExpressJet common stock at a purchase price of $3.50 per share in cash. This represents a significant 59% premium over ExpressJet’s closing price today and a 63% premium over ExpressJet’s average closing price for the last 30 days. We believe that $3.50 per share is a full and fair price for ExpressJet’s common stock and provides an attractive opportunity for your stockholders to maximize the value of their investment in ExpressJet. This transaction would not be subject to a financing condition or approval by our stockholders. We would finance the purchase price with existing cash on hand and, if appropriate, other readily available financing.
We have negotiated a new capacity purchase agreement with Continental Airlines, Inc., which will become effective upon satisfactory completion of due diligence and consummation of the proposed transaction. In connection with that agreement, Continental would consent to the change of control that would occur upon the consummation of the proposed transaction. For your information, Continental has informed us that they are not in discussions with any other carrier regarding a Capacity Purchase Agreement.
We believe that our proposal would be in the best interests of ExpressJet and its stockholders, particularly given the uncertainty in the airline sector, the high price of oil and, as outlined in your public filings, the risks of your business related to your relationship with Continental. We also believe that our proposal would be beneficial to other ExpressJet constituencies. Additionally, we believe our proposal is compelling given your current cash burn rate and the need to satisfy the redemption of approximately $130 million of convertible notes this summer.
We have engaged Raymond James as our financial advisor and Parr Waddoups and Skadden Arps as legal counsel to advise us in this transaction. We and our advisors are ready to meet with you and your advisors at any time to discuss all aspects of our proposal and to answer any questions you or they may have about the proposal.
This proposal is subject to reaching a mutually satisfactory definitive acquisition agreement, our completion of due diligence, the completion by Continental of due diligence and final approval of the transaction and Capacity Purchase Agreement by our Board of Directors. We would like to commence the due diligence and negotiation of an acquisition agreement as soon as possible. Given our familiarity with your business and the industry, we are confident that once our management team and legal and financial advisors are given access to ExpressJet’s books and records, they will be able to complete their due diligence on an expeditious and accelerated basis. Continental will coordinate its due diligence efforts with you.
This proposal is also conditioned upon ExpressJet obtaining a clarification and/or amendment, satisfactory to us, to the collective bargaining agreement (the “CBA”) between ExpressJet Airlines, Inc. and the pilots in the service of ExpressJet Airlines, as represented by the Air Line Pilots Association, International (“ALPA”), dated December 1, 2004. First, we need clarification that nothing in the CBA (including, but not limited to, Section 1.D.3) would obligate us to merge the operations of ExpressJet Airlines with those of any or all of our currently-owned airline subsidiaries, or any airline subsidiaries we may acquire in the future, or otherwise apply to us or any of our subsidiaries or affiliates (other than ExpressJet and its subsidiaries). Secondly, we need the agreement of ALPA that the certain undated letter among ExpressJet, XJT Holdings, Inc., ALPA and the ExpressJet MEC, appended as pages 223 through 226 of the CBA, shall be revoked and deemed null and void, prior to the conclusion of the acquisition.
To effect this transaction, we and a newly-formed wholly owned subsidiary would enter into a definitive acquisition agreement with ExpressJet. Assuming that the conditions relating to the amendment of ExpressJet’s CBA discussed in the preceding paragraph has been fulfilled, we would be prepared to structure the transaction as a first-step tender offer followed by a second-step acquisition. The tender offer would be conditioned on the tender of a majority of the fully-diluted shares of ExpressJet’s common stock, the receipt of all necessary regulatory approvals, the absence of a material adverse change and other customary conditions. In order to allow for a second-step “short form” acquisition, we also would anticipate receiving a customary “top up option” to purchase an amount of ExpressJet common stock that, when added to the number of shares owned by SkyWest at the time of exercise of the option, constitutes one share more than 90% of the fully diluted shares of ExpressJet common stock. We and our legal counsel have completed a preliminary review of the transaction in light of regulatory approvals and do not foresee any impediments to the completion of the transaction.
Subject to events as they may develop, and depending upon ExpressJet’s response to our proposal, we hope to be able to discuss this with you and your Board on a non-public basis. We ask that you advise us of any plan by you to make our proposal public prior to doing so.
We hope you share our enthusiasm for the proposed transaction and we look forward to hearing from you. Please contact me as promptly as possible to discuss how we may best proceed, and in any event, please respond by next Monday, April 14th.
Sincerely yours,


Jerry C. Atkin
Chairman and Chief Executive Officer
SkyWest, Inc.
 
The letter from SkyWest mentioned voiding pages 223-226 of the pilot contract.

Those pages talk about all flying on airplanes over 19 seats being done by XJT pilots, the recognition of ALPA as the representative for the pilot group, that the new holding company adopts an "identical" pilot contract, that the ALPA merger policy will be used for SLI, that the new holding company will be neutral if XJT pilots try to unionize the new pilot group if they aren't currently organized.

It's too long to copy/paste.
 
I believe that letter showed the importance of having such clauses as referenced that Skywest wants removed...
 
April 7, 2008

Mr. James B. Ream
Chief Executive Officer and President
ExpressJet Holdings, Inc.
700 North Sam Houston Parkway, Suite 200
Houston, TX 77067


Mr. George R. Bravante, Jr.
Chairman
ExpressJet Holdings, Inc.
700 North Sam Houston Parkway, Suite 200
Houston, TX 77067


Dear Jim and George:

We understand that SkyWest, Inc. (“SkyWest”) has delivered to you an offer to acquire ExpressJet Holdings, Inc. (“ExpressJet”). In connection with your consideration of such offer, we wanted to inform you of our understanding with SkyWest regarding a new capacity purchase agreement (“CPA”) and our intentions regarding our existing contractual relationship.

First, we confirm that we have negotiated a new CPA with SkyWest, which would become effective if SkyWest is successful in acquiring ExpressJet (which, in turn, is subject to due diligence, among other things), and that we would consent to the change of control that would occur upon such an acquisition.

Second, absent our entering into a new CPA with savings of the magnitude we have negotiated with SkyWest, we currently expect to deliver to ExpressJet on June 28, 2008, a notice to withdraw 51 of the existing 205 Covered Aircraft from the current CPA, beginning in December 2009. Further, although we have the right to terminate the existing CPA at any time, we currently anticipate we will not extend the term of the current CPA (which we must do, if at all, by December 31, 2008), and thus the current CPA would simply expire in accordance with its terms beginning on December 31, 2010, with the expectation that all aircraft would be removed from the current CPA by the end of 2012.

We hope this information is helpful to you.

Sincerely,

Jeffrey J. Misner
Executive Vice-President and Chief Financial Officer
Continental Airlines, Inc.
Click to expand...

CAL basically has said, take it or die.
 
So I go on vacation and all this news is coming out -- even the stuff about SKY negotiating a CPA with CAL. Why does it feel like this industry is walking on eggshells?
 
meritflyer said:
CAL basically has said, take it or die.
Click to expand...

People.... please read the whole letter.


It says to match Skywest's offer or lose the contract. Not that they WILL lose the contract.


Skywest offered a cheaper price in the event of a merger to get CAL's approval. CAL has decided that they like that price and thus if ExpressJet doesn't match Skywest's price they won't renew the contract.

There's nowhere there that indicates a merger is demanded... but matching the price IS.


Stuff like this is regular games played by the majors to pit the regionals against eachother...difference here is that someone is leaking the confidential e-mails.
 
Baradium said:
People.... please read the whole letter.


It says to match Skywest's offer or lose the contract. Not that they WILL lose the contract.


Skywest offered a cheaper price in the event of a merger to get CAL's approval. CAL has decided that they like that price and thus if ExpressJet doesn't match Skywest's price they won't renew the contract.

There's nowhere there that indicates a merger is demanded... but matching the price IS.


Stuff like this is regular games played by the majors to pit the regionals against eachother...difference here is that someone is leaking the confidential e-mails.
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Not true.

The letter from CAL's VP was filed with the SEC not some conspirator like you think. Maybe you don't remember the last time XJT called CAL's bluff.
 
Okay, so Skywest says "We've undercut you, we've got the deal pretty much done, but we'd like to buy you. Oh, but we want your scope clause gone if we do it." Sounds to me like XJT's contract is damn good. Basically, without losing the scope, Skywest would find intself in a Pinnacle Holdings situation and be forced to integrate the XJT pilots into the Skywest seniority list.....and take ALPA, which we ALL know they don't want. They're more or less telling XJT they want to buy them, but in order to do so, they have to sign away all their rights.

When they say they're going to form a wholly owned to buy them, warning flags went up. Without that scope clause, there is NO protection from Skywest buying XJT, moving those planes over to another cert and then shutting them down. With the scope clause intact, any flying over 19 seats has to be flown by XJT pilots. Waive that, and watch your flying get transferred to another cert. There's nothing you can do about it. This is EXACLTY why we dug our heels in against management when they bought Colgan.
 
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