A special committee of ExpressJet's board rejected the cash offer of $3.50 a share, calling it an "opportunistic" effort to buy the SkyWest rival for a price that would be far below the value it would bring to a combined airline.
Kristy Nicholas, an ExpressJet spokeswoman, declined to comment, except to say the offer made in a letter from SkyWest CEO Jerry Atkin to ExpressJet CEO James Ream and Chairman George Bravante was a surprise.
"We had not put ourselves up for sale," Nicholas said.
Mike Kraupp, SkyWest vice president of finance and treasurer, said the airline hasn't decided whether to boost the offer, which valued ExpressJet at roughly $185 million.
"We believe the ball has returned to our court to evaluate our options," Kraupp said.
In the April 7 letter, Atkin said the offer represented a 63 percent premium over ExpressJet's closing share price over the previous 30 days.
Atkin said SkyWest would buy ExpressJet with existing cash, which totaled $660 million at the end of last year. The deal wouldn't need approval by shareholders of St. George-based SkyWest, he said.
He said the proposal would be in the best interest of ExpressJet and its stockholders, given the "uncertainty" in the airline industry and the record price of crude oil, which is draining profits from most carriers and causing many to consider mergers. On April 14, Delta Air Lines and Northwest Airlines agreed to a union that would create the world's largest carrier.
Atkin also mentioned "risks" ExpressJet faces in its business relationship with Continental Airlines, but didn't elaborate.
ExpressJet operates commuter flights for Continental, as well as under its own name. Like SkyWest, it also flies for Delta as Delta Express.
A union with ExpressJet would allow SkyWest to further diversify its contract flying operations. Besides Delta, SkyWest also flies for United Airlines and Midwest Airlines. A combination would also put SkyWest into areas of the country where it doesn't already fly. ExpressJet has hubs in Cleveland, Houston and Newark, N.J.
ExpressJet said it has begun a review of its options, including more talks with SkyWest and other airlines that might be interested in the carrier.
The previously undisclosed offer caught investors by surprise. ExpressJet shares surged 55.5 percent, rising $1.16 to close at $3.25 after the airline published a statement on its Web site. SkyWest settled at $17.25, up 9 cents, or 0.5 percent.
In February, Russell Childs, president of SkyWest Airlines, said the company was looking for ways to grow in size. The subsidiary of SkyWest Inc. has customarily gotten bigger by winning new flying contracts from other carriers.
But in September 2005, SkyWest diverged from that pattern when it bought Atlantic Southeast Airlines from Atlanta-based Delta. An acquisition of ExpressJet would be SkyWest's first airline purchase since ASA.
"We are looking at other opportunities. The ExpressJet offer is not the only other opportunity we are looking at," Kraupp said. He declined to elaborate.
SkyWest and ExpressJet are rivals at Salt Lake City International Airport. SkyWest operated 6,460 flights at the airport in February, according to U.S. Department of Transportation figures. ExpressJet flew 363 flights in and out of the airport.
pbeebe@sltrib.com
ExpressJet Holdings
* Main subsidiary: ExpressJet Airlines
* Headquarters: Houston
* Business: ExpressJet flies for Delta Air Lines, Continental Airlines and under its own brand
* 2007 revenue: $1.69 billion
* 2007 loss: $70.3 million
* Employees: 9,000
* Fleet: 274 aircraft
* Hubs: Houston, Cleveland, Newark, N.J.
