ASTAR Air Cargo opens takeover talks with ABX Air

ASTAR Air Cargo opens takeover talks with ABX Air Miami-based ASTAR Air Cargo has approached Wilmington, Ohio-based cargo airline ABX Air about a possible takeover.
   DHL earlier this month acquired a 49 percent equity stake and 24.9 percent voting rights shares in ASTAR.
   Astar and ABX have been in discussions since December, according to the all-cash offer letter from John Dasburg, chairman and chief executive of Astar, posted on the company’s Web site. Astar would pay $7.75 per share of ABX stock, representing a 15 percent premium to the ABX average stock price for the past 30 days and a 6 percent premium to the highest price during that period.
   Based on ABX’s outstanding shares the offer is worth $455 million.
   If successful, the move would bring full circle DHL’s efforts to establish an integrated air and ground express delivery service in the United States to compete with FedEx and UPS.
   DHL was forced to unload its airline to comply with U.S. corporate citizenship rules when German postal and logistics conglomerate Deutsche Post took control of the company in 2002. U.S. law limits foreign ownership to 25 percent of the voting stock of an airline and 49 percent of the non-voting stock, and requires U.S. citizens to hold two-thirds of the company's executive positions.
   DHL's U.S. subsidiary sold the airline to a group of American investors in 2003. The sale was closely reviewed by the Department of Transportation amid complaints from FedEx, UPS and others that DHL's position as ASTAR's dominant customer meant that it essentially still controlled the domestic-flag carrier. The two giant U.S. express carriers alleged that the investors got a sweetheart deal from DHL and are beholden to DHL through financial arrangements.
   The DOT decided that ASTAR complied with U.S. ownership requirements and was not indirectly controlled by foreign interests.
   Concurrently, DHL bought Airborne Express in 2003 and was forced to spin off the express carrier’s in-house airline as an independent company — now called ABX Air.
   DHL is the primary customer for ABX Air and Astar. DHL recently said it has extended its dedicated charter agreement with Astar until 2019, nine years longer than the current arrangement with ABX. Dasburg said ASTAR has negotiated a further extension of its contract in the event of a successful merger to ensure jobs for ABX employees.
   “We believe that we would well serve our respective shareholders and other stakeholders by exploring a potential merger between our two companies. We also believe that this should be done in an expeditious fashion so as to avoid unnecessary disruption of ABX’s and ASTAR’s employees, customers and businesses,” Dasburg said.
   “(C)onsolidating these companies under one management team would create a more effective overall operation, reducing administrative costs, simplifying operations and facilitating better long-term planning and fleet renewal,” Dasburg said about his long-held desire to acquire ABX Air.
   ABX had $1.2 billion in sales in 2006.
   “Discussions are at a preliminary stage and there can be no certainty as to their outcome,” said Deutsche Post World Net, parent company of DHL, in statement.
   Meanwhile, DHL said Thursday it has completed the transaction to form a strategic partnership with Polar Air Cargo, a unit of Atlas Air Worldwide Holdings. Last fall it said it would invest $150 million for a 49 percent stake and 25 percent voting rights in Polar to ensure airlift for DHL shipments between the United States and Asia. The guaranteed capacity arrangement could be worth $3.5 billion in revenue to Polar and Atlas during the next 20 years.
   Polar Air said it will continue to operate as an independent company and there will be no integration with DHL or any of its business units.