The Work

May 2, 2010 10:05 PM

Five Firms Take Off with Continental-United Merger

Posted by Brian Baxter

Update, 5/4/2010, 10:20 a.m. The fourteenth paragraph of this story has been updated with the names of antitrust lawyers from Howrey.

Update, 5/3/2010, 10:15 a.m. The sixth paragraph of this story has been updated with the names of additional lawyers from Cravath.

Update, 5/2/2010, 10:05 p.m. The New York Times and other news sources reported Sunday afternoon that the boards of both UAL and Continental have agreed to a $3 billion merger; an official announcement is expected Monday. United is buying Continental, and the combined company will keep the United name and be based in Chicago, the Times reports. Continental chief executive Jeffery Smisek will run the company.

Less than a month after merger talks reportedly were heating up between UAL's United Airlines and US Airways, the two have gone their separate ways last week. Now it's a United/Continental merger that appears to be near completion.

The Wall Street Journal reported Friday that Continental and United will announce a merger on Monday, while Bloomberg says the two airlines have tentatively agreed on an exchange ratio for their all-stock merger. The boards of both airlines are expected to vote on the merger over the weekend.

The tie-up would create the world's largest carrier by passenger traffic, according to The Associated Press. The newly merged company, the AP reports, will be called United. Both carriers had previously considered a merger two years ago, but that deal collapsed over concerns about oil prices and $537 million in first-quarter losses by United that year.

The Am Law Daily has learned that four firms are advising Continental and United on the current prospective deal.

Cravath, Swaine & Moore has reprised its role representing Chicago-based United in merger talks. Corporate partner Scott Barshay, who previously led a team from the firm advising United on scuttled talks with US Airways and Continental in 2008, was traveling on Friday and unavailable for immediate comment.

Barshay led a Cravath team advising United that includes corporate governance cochair John White, corporate partners George Zobitz, William Fogg, and Tatiana Lapushchik, antitrust partners Stuart Gold and Katherine Forrest, employee benefits partner Jennifer Conway, and tax chair Stephen Gordon.

Continental has turned to Jones Day, Vinson & Elkins, and Freshfields Bruckhaus Deringer for legal counsel. All three firms have long-standing ties to the Houston-based airline.

Continental chairman and CEO Jeffery Smisek is a former corporate finance and securities partner at V&E. He joined Continental as senior vice president and general counsel in March 1995, was elected to the company's board of directors in December 2004, was promoted to president and COO in September 2008, and became the airline's top executive on January 1 of this year. Jennifer Vogel, chief compliance officer and general counsel for Continental, is also a former V&E corporate finance and securities partner. She has been a senior vice president at Continental since September 2003.

V&E has handled antitrust litigation for Continental in the past, but the firm is providing securities and due diligence counsel to the airline on its proposed merger with United. Kevin Lewis, an M&A partner in V&E's Houston office, did not immediately return a request for comment.

Jones Day lawyers are advising Continental on its proposed merger agreement with United. M&A chair Robert Profusek in New York and M&A partner J. Mark Metts in Houston are leading a team from the firm. Neither lawyer immediately returned phone calls seeking comment.

Jones Day handled Continental's bankruptcy a decade ago and also represented the company when it was a creditor in the Chapter 11 cases of Delta Air Lines five years ago. The firm also handles litigation matters for Continental.

Surprisingly for Jones Day, sources say that the firm is not involved in the antitrust arena for Continental. The firm has previously advised other prominent players in the U.S. aviation industry--such as American Airlines--on antitrust matters.

Instead the antitrust work went to Freshfields, which handled reviews of Continental's proposal to join United in the Star Alliance of global airlines last year. Paul Yde, a Freshfields antitrust partner who handled that matter in Washington, D.C., did not immediately respond to a request for comment.

Trevor Soames, cochair of Howrey's worldwide antitrust practice in Brussels, is leading a team from the firm serving as E.U. competition counsel to United. He's being assisted by partners Geert Goeteyn and Goetz Drauz and senior associates Kristian Hugmark and Sarah Jordan. United is a longtime client of the firm.

Should Continental and United receive regulatory approval for their merger, Delta Air Lines would be unseated as the world's largest airline. Delta bought Northwest Airlines in April 2008 through a $3.63 billion stock swap and received antitrust approval for the acquisition the following October.


United, Continental May Win U.S. Support by Ceding Some Flights

United and Continental Said to Agree to Merge
The New York Times

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