UAL Corp, parent of United Airlines, will buy Continental Airlines Inc for $3.2 billion (£2.01 billion), in a deal that forms the world's largest airline, the two carriers said today.
The two airlines will merge in an all-stock deal to form an airline that carries the United Airlines brand. The merged airline will be based in Chicago.
Continental chief executive Jeff Smisek will run the combined airline with over $29 billion (£19 billion) in annual revenue.
UAL CEO Glenn Tilton will be non-executive chairman. Smisek would also become executive chairman of the board upon Tilton's ceasing to be non-executive chairman.
The name of the holding company would be United Continental Holdings Inc, and the name of the airline will be United Airlines.
Continental shareholders will receive 1.05 shares of United common stock for each Continental common share they own. Based on United's stock price of $21.83 on Friday afternoon, and Continental's 139.6 million outstanding shares as of April 21, United would pay $3.2 billion for Continental.
Based on current shares outstanding, a combined company would have 314.5 million shares, and UAL shareholders would own roughly 55 percent of the new company.
If the deal receives government approval, it would generate $1-$1.2 billion in revenue and cost benefits for the combined company by 2013, the airlines said. The companies expect to complete the transaction in the fourth quarter of 2010.