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United Airlines And Continental Airlines Merger Essay

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The first merger negotiation between United Airlines (UAL) and Continental Airlines started in 2008 and has been lingering for years until they officially finalized the merger deal on October 1, 2010, following an agreement made in May of that year. The $3.17 billion merger of United Airlines and Continental Airlines resulted the airline in becoming the world’s largest airline. The horizontal merger between the two giants in the airline industries, gave them more leverage, because consumers will have less options with higher prices and more fees. In addition, this combination gave the new merged company more power to compete against local competitors as well as competing against large foreign carriers abroad. The management of both companies believed that a merger would give them a chance to become the largest airline and possibly result in gaining additional increase in sales. The predicted annual revenue of the combined companies would be $31.4 billion, based on analysis from the past 12 months from the merger date. …show more content…

In addition to the approximate $9 billion in unrestricted cash, shareholders of Continental will receive 1.05 shares of common stock of United Continental Holdings, Inc. The current United Airlines shareholder‘s ownership will be approximately 55% of the equity of the holding company. Continental shareholder will own the remainder of 44% including in-the-money convertible securities on an as-converted basis. The equity awards were assumed and issued by United Airlines using a 1.05 conversion rate and had a fair value of approximately $78 million at the merger closing date which was included in the acquisition

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