DHL: Airborne deal not contingent on DOT approval
DHL Worldwide plans to go ahead with its purchase of Airborne Inc. even if the U.S. Department of Transportation rejects the deal.
If Airborne and DHL, which is owned by Deutsche Post World Net of Germany, cannot obtain DOT approval, DHL would acquire all of Airborne and then transfer Airborne’s freighter fleet to a third-party operator, according to James Valentine, an analyst with Morgan Stanley.
In a report issued Friday, Valentine said he had met privately earlier in the week with Klaus Zumwinkel, chief executive of Deutsche Post World Net, “and he made it clear that DPWN doesn’t care who owns the planes.”
The merger agreement states that “failure to obtain DOT approval, in and of itself, shall not be a condition to parties’ obligations to consummate the merger or effect the transactions contemplated by the transaction agreements.”
Jim Barron, a spokesman for Airborne, stressed the company’s desire to win DOT approval for the deal, which calls for a spin-off of Airborne’s airline subsidiary into a new company called ABX Air, which would be owned by U.S. shareholders.
“We intend to seek and obtain all required approvals from DOT or other regulatory authorities,” he said. “We are confident that regulators will conclude that this deal is pro-competitive and in the best interests of U.S. workers and U.S. customers.”
DHL and Airborne contend that the deal would benefit U.S. shippers because it would provide a third major alternative to FedEx Corp. and United Parcel Service, which dominate the U.S. express delivery market.
FedEx and UPS oppose the acquisition, saying that it would violate U.S. law requiring that that U.S. airlines must be owned and controlled by U.S. citizens. Even if the new ABX Air is owned by American citizens, German-owned DHL would effectively control it because it would be the dominant customer.
Valentine, however, pointed out that it is “standard practice” for companies to use third-party operators that would provide the aircraft, crew, maintenance and insurance.
If DHL transferred ownership of the aircraft, it would probably do so under a cost-plus agreement with the third-party operator.
The agreement calls for the acquisition to be completed by July 25.
Airborne shareholders would receive $21.25 plus one share in the new ABX Air for each share of Airborne if the airline is spun off. If it’s not spun off, they would get $21.65 for each share.
