Latest on ACA

davetheflyer

New Member
Needless to say, we aren't too excited about this latest development. The consensus is that only Mesa and UAL stand to benefit.

========
October 6, 2003
Mr. Kerry B. Skeen
Chairman and Chief Executive Officer
Atlantic Coast Airlines Holdings, Inc.
45200 Business Court
Dulles, Virginia, 20166

Dear Kerry,

I tried to reach you this morning to tell you first hand about our
intentions. Mesa Air Group, Inc. ("Mesa") believes that a combination
with Atlantic Coast Airlines Holdings, Inc. ("ACA" or the "Company")
is compelling and in the best interests of both companies, our
respective shareholders, employees and customers. While we have
reviewed only publicly available data to this point, we are prepared
to move forward promptly with a business combination between the two
companies.

Accordingly, Mesa is seeking to enter into an agreement with ACA to
acquire all the outstanding stock of ACA in a tax-free transaction
whereby Mesa would issue 0.9 of a share of its common stock for each
ACA share. Based on our closing share price of $12.55 and based on
ACA's closing share price of $9.02 on October 3, 2003, our offer
represents a premium to your shareholders of 25% over the current
value of their shares. This price also represents a premium of 35%
over the average closing price of ACA since late July, and we believe
shares in the combined company will provide exceptional future value
to the ACA shareholders.

There are clear strategic benefits. A combination would form the basis
to leverage each company's assets, franchise, partners and management
expertise to better position the combined company in today's
competitive marketplace. It is clear that such a transaction would
enable us to service the needs of our airline partners more
efficiently and profitably. If we can realize only a small portion of
the potential strategic benefits, we believe our combined earnings
could improve by over 25%. Furthermore, our focus will remain in the
business of providing cost effective regional feed for our airline
partners.

Our proposal will be subject to only customary conditions, including
among others, obtaining necessary regulatory approvals, the redemption
of the ACA Right's Plan in accordance with its terms, the completion
of satisfactory due diligence, negotiation of definitive agreements
and necessary shareholder approvals.

Although we are offering a full and fair price to ACA shareholders, we
may have flexibility on deal terms and structure if you are willing to
work with us towards consummating a transaction. In connection with
our proposal, we have retained Cadwalader, Wickersham & Taft LLP as
counsel and Merrill Lynch & Co. as financial advisor.

In light of the compelling benefits to our respective shareholders and
the materiality of this proposal, we are publicly releasing the text
of this letter. Our strong preference would be to work with you to
reach a mutually acceptable transaction. I would be happy to meet with
you or to meet with your Board at its convenience to discuss in
greater detail our thoughts with respect to a possible business
combination and the future role that you and your management team
would have in the combined entity. I look forward to hearing from you
or one of your representatives as soon as possible.

Sincerely,


Jonathan G. Ornstein
Chairman of the Board & Chief Executive Officer

cc: Board of Directors, ACA
======
>>Yahoo Business - Reuters
Mesa Makes Bid for Atlantic Coast Air
Mon Oct 6, 6:33 PM ET

Add Business - Reuters to My Yahoo!

By Arindam Nag and Kathy Fieweger

NEW YORK/CHICAGO (Reuters) - Atlantic Coast Airlines
Inc. (Nasdaq:ACAI - news) on Monday received an
unsolicited offer to be bought out by Mesa Air Group
Inc. (Nasdaq:MESA - news), little over two months
after it said it would start a new low-cost airline.

Related Quotes
DAL
ACAI
MESA
UALAQ
DJIA
NASDAQ
^SPC
14.03
11.05
11.56
N/A
9594.98
1893.46
1034.35
+0.52
+2.03
-0.99
N/A
+22.67
+12.89
+4.50

delayed 20 mins - disclaimer
Quote Data provided by Reuters

Automate Your Home
Wire the house to practically run itself. Get the best
gear, and a peek at the
next generation



In a letter to Atlantic's chief executive Kerry Skeen,
which was made public, Mesa's Chairman and Chief
Executive Jonathan Ornstein said his firm was
proposing an all-share offer, which would value
Atlantic at around half a billion dollars. Atlantic
said it was reviewing the offer.

Mesa has proposed swapping 0.9 of its own shares for
each Atlantic share, which based on Mesa's Monday
closing share price, values each Atlantic share at
$10.40 and the whole company at little under half a
billion dollars. Mesa's shares closed $11.56, nearly
eight percent below its previous close.

Atlantic shareholders would own around 49 percent in
the combined group while Mesa shareholders would own
51 percent. The whole entity would be capitalized at
around a billion dollars.

Mesa's offer comes against the background of
Atlantic's recent failure to reach a contract with UAL
Corp.'s (OTC BB:UALAQ.OB - news) United Airlines on
payment for Atlantic's regional feeder service.

Atlantic derives as much as 85 percent of its revenue
from United. In July, as no deal with United seemed
likely, Atlantic announced plans to start its own
low-fare service. But analysts were skeptical of the
plan and many downgraded the stock.

United, operating in bankruptcy protection since
December, is sharply cutting its costs in all venues,
including reaching new deals with its regional
affiliates.

"The stand they have taken so publicly on the
direction they said they would like to go, our best
judgment was that our offer will be rebuffed, or at
the very least a lot of time will go by before it was
rebuffed," said Peter Murnane, Chief Financial Officer
of Mesa on why the company decided to make the
unsolicited approach public before negotiating a
proposal.

Some bidding companies launch a takeover process this
way, typically describe as "bear hug," to put the
target company in the spotlight so that it does not
stall pondering the offer and has to respond soon.

"At first glance it appears to be a nice alternative
to Atlantic Coast's current plans to transform into a
low-fare airline as we are not convinced that this
low-fare strategy would be successful, given the cost
structure of flying regional jet aircraft," wrote
Deutsche Bank in a note to its clients.

According to its second-quarter results statement in
July, Atlantic, based in Dulles, Virginia, has a fleet
of 148 aircraft and serves 84 destinations in the
United States and Canada. It flies from Washington
Dulles International Airport and Chicago's O'Hare
International Airport as a United Express carrier. It
also flies from Cincinnati and Boston as part of Delta
Air Lines Inc.'s (NYSE:DAL - news) connection program.

Regional carrier Mesa, which is being advised in its
takeover bid by Cadwalder, Wickersham & Taft and
investment bank Merrill Lynch, is based in Phoenix and
flies to 163 cities in the United States, Canada,
Mexico and the Bahamas.

If Mesa succeeded in getting the deal done, it will
continue with Atlantic's earlier business model of
being partners of United Airlines and Delta rather
than launching a new low cost airline, Murnane said.

"I think it makes a lot of sense," said Blaylock &
Partners analyst Ray Neidl said of the proposed offer.

Given the uncertainty Atlantic Coast created when it
announced its plans to create a free-standing low-fare
airline, Neidl said it was not surprising that rivals
would be interested in acquiring the company.
 
Top