United and Continental to Merge in $3.15 Billion Deal

Continental Airlines Inc. and United Airlines parent UAL Corp.
said Monday they would merge their operations in a $3 billion-plus all-stock
deal that would create the world’s No. 1 global carrier, with combined annual
revenue of $29 billion.


United

The transaction, valued at roughly $3.15 billion, follows weeks
of negotiations that were hung up most recently over price terms.

The United Airlines brand name will take over, and United
Continental Holdings Inc. will be the holding company. The new airline will be
based in United’s hometown of Chicago.

Under the deal that finally emerged, Continental shareholders
will receive 1.05 UAL shares for each share of common stock that they now own. UAL
shareholders will own 55% of the company.

Continental Chief Executive Jeffrey Smisek has been tapped as
CEO of the combined company and is slated eventually to become its chairman.
Glenn Tilton, CEO of UAL, will serve as nonexecutive chairman through 2012.

Both companies’ boards have approved the terms, and shareholders
are expected to vote in their favor by September. The deal, which is subject to
regulatory reviews, is expected to close in the fourth quarter.

By the first half of 2012, the new airline should be operating
on a single operating certificate to become the world’s largest airline in
terms of traffic.

The carriers, currently partners in the Star Alliance and
sharing revenue on international routes, will have combined annual revenue of
$29 billion with $7.4 billion in unrestricted cash.

“This combination brings together the best of both
organizations and cultures to create a world-class airline with tremendous and
enduring strengths. Together, we will have the financial strength necessary to
make critical investments to continue to improve our products and services and
to achieve and sustain profitability,” Tilton said in a statement.