SkyWest Vice President Mike Kraupp told Regional Aviation News that a bidding war for the acquisition of ExpressJet (XJT) is unlikely since Continental must approve the deal and it has already cut a capacity purchase agreement with SkyWest dependent on the acquisition.
“While it is certainly possible, I don’t think it probable,” he said. “If you look at the carriers, there are not a lot of players. But the key driver is Continental’s approval of whoever is going to use their code. They have already come out with a decision.”
Kraupp could not say who approached whom on the new CPA. “We’ve had a business relationship over the last 10 to 12 years,” he said. “We had a dual code share relationship between Continental, Delta and SkyWest in the 1995 to 1997 time frame and, a few years ago, we did some turboprop flying for Continental in and out of Texas markets with a fleet of 15 or so aircraft. We’ve been talking on and off for some time about exploring an opportunity and I think it was a mutual effort born out of an opportunity. Continental has been trying to work with ExpressJet for some time to reduce the cost of the operation and there have been lots of negotiations back and forth. It is just an opportune time for both of us to get together to see if we can come up with something more productive for Continental.”
He would not discuss the margin afforded by the proposed SkyWest/Continental agreement, adding it was part of the negotiations. On whether XJT can now go back to Continental and cut its own deal, he said the key point is the fact that Continental has been trying to do this for three years. “There’s one school of thought that ExpressJet may be coming to table too late,” he said. “But Continental has to evaluate that and they are in the driver’s seat. The point ExpressJet management should take into consideration is the fact that Continental is serious and so is SkyWest.”
Kraupp would not say whether SkyWest would better its offer which represents a 50 percent premium of the price of XJT stock prior to the offer. “The stock retreated further after April 7 and our offer gained in value,” he noted. “Although we are disappointed, it is not surprising what they are trying to do. They are trying to maximize share holder value. We provided and put an offer on the table we considered to be fair and full value, now the ball is back in our court to determine how and if we proceed.”