DHL to acquire ground ops of Airborne Inc. to create stronger third competitor in US market

Airborne, Inc. and DHL announced today that they have entered into a definitive merger agreement that will create a stronger third competitor in the U.S. express delivery market and bring the benefits of intensified competition and enhanced service to millions of small- and medium-sized businesses that purchase expedited door-to-door delivery of small packages and documents.

Under the terms of the agreement, DHL will acquire Airborne's ground operations for $21.25 per share in cash, or a total equity value of approximately $1.05 billion. Upon conclusion of the acquisition, Airborne's air operations will be separated from its ground operations and will become an independent public company, called ABX Air, Inc. ("ABX Air"). ABX Air will be wholly owned by Airborne's current shareholders, who will each receive one share of ABX Air for every Airborne share they hold.

"The UPS/FedEx duopoly has a 79% share of the U.S. express delivery market, and the combination of DHL and Airborne will enable us to create a much stronger competitor, which will benefit a broader range of express delivery customers," said Carl Donaway, Chairman and CEO of Airborne, who will become the CEO of the enlarged DHL business in the U.S. "In the markets we compete in today, made up primarily of large, corporate accounts, Airborne's price levels are substantially lower than our competitors. The expanded DHL business will have the capital and resources to leverage this value into the small to mid-sized marketplace.

"This is a pro-competitive transaction that has compelling benefits for shareholders, customers, and employees," continued Donaway. "Although Airborne has been adjusting to a dynamic and changing marketplace, this merger will bring the company to another level of competitiveness in an industry that badly needs more competition. We will be able to provide better value to customers today while investing in expanded service, new products and innovative technology in the future."

"This combination will strengthen DHL's presence in the U.S., and our global presence will bring significant benefits to Airborne customers," said Uwe Doerken, CEO of DHL Worldwide. "We see great opportunity for DHL to build on the capabilities of the new combined company in the U.S. market, especially in the under-served small- and medium-sized business segments, and we are prepared to make a substantial long-term marketing investment to build a strong competitor able to provide increased value for U.S. customers."

Airborne is the third largest air overnight parcel carrier in the United States, with an 18.8% market share in the air overnight category, delivering approximately 356 million domestic parcels in 2002. DHL has the world's most extensive international parcel delivery network, with service to 120,000 destinations in more than 220 countries worldwide. Although DHL has the leading market share in international express delivery outside the U.S., it has less than a 2% share of the U.S. air overnight domestic market today.

The U.S. ground operations of Airborne and DHL will operate under the DHL brand. "We will seek to build on the best of both companies while maintaining our focus on superior service, performance and productivity. The combination of Airborne and DHL will result in increased opportunity for employees of both companies because the combined U.S. operations will be able to compete more effectively and pursue a more aggressive growth strategy," said Donaway.

The transaction, which is subject to shareholder and regulatory approvals, is expected to be completed during the summer of 2003.

ABX Air will have its own Board of Directors, management, independent auditor and SEC financial reporting requirements. The Chief Executive Officer will be Joe Hete, who is currently the senior operating executive of Airborne's airline operations. To ensure ABX Air continues to meet U.S. citizenship requirements, its certificate of incorporation will include standard mechanisms to prevent foreign entities from gaining a control position, including share ownership limits and foreign owner share registry.

On completion of the transaction, ABX Air and DHL will enter into arms-length commercial agreements that will govern their relationship, including an aircraft, crew, maintenance and insurance (ACMI) agreement under which the new airline company will provide air service to DHL's ground business. It will also provide these services to third parties.

Goldman, Sachs & Co. is serving as financial advisor to Airborne and O'Melveny & Myers is serving as legal advisor. Deutsche Bank is serving as financial advisor to DHL and Simpson Thacher & Bartlett is serving as legal advisor.