The Retirement Systems of Alabama, Montgomery, will not have a controlling stake in the new company expected to be formed from the merger agreement between US Airways Group Inc., Arlington, Va., and Phoenix-based America West Airlines Inc. If the deal is approved by the U.S. Bankruptcy Court in Alexandria, Va., the $30 billion Alabama pension fund could also get back some of the $240 million it spent in 2002 for a 37.5% ownership stake in US Air, said David Bronner, the systems' CEO and chairman of US Air. However, Mr. Bronner declined to speculate on how much the fund might get back, and he said it already wrote off the ownership stake last year.
"We're talking about an investment that was less than 1% of our total assets. At the end of the year, we were still up by $5.3 billion. That's the real story," said Mr. Bronner.
The net value of the new company is speculated to be about $850 million. Under the terms of the merger agreement, new equity investors, which have agreed to pump about $350 million into the company, will get a 41% stake in the combined airline. America West's shareholders will get 45%, while US Air shareholders, including creditors, will get 14%. The bankruptcy court will decide how much of that 14% each US Air creditor will get. Mr. Bronner declined to speculate on how much the Alabama fund will receive.
Only investors willing to put up money for the new company will get seats on its board, Mr. Bronner said. "What we did was take a calculated risk; we could have said we want to be a major player in this (the new company), but we decided not to put up a cent. It was, however, an ingenious deal that that saves jobs. It's a good proposition for all the players in the airline industry."
Investors in the new company include ACE Aviation Holdings Inc., parent to Air Canada, and private equity firms PAR Investment Partners and Peninsula Investment Partners.
