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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13E-3
Rule 13E-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
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COMAIR HOLDINGS, INC.
(Name of Issuer)
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DELTA AIR LINES, INC.
DELTA AIR LINES HOLDINGS, INC.
KENTUCKY SUB, INC.
(Name of Person(s) Filing Statement)
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Common Stock, No Par Value
(Title of Class of Securities)
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199789 10 8
(CUSIP Number of Class of Securities)
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Robert S. Harkey, Esquire
Senior Vice President - General Counsel
Delta Air Lines, Inc.
Hartsfield Atlanta International Airport
Atlanta, Georgia 30320
(404) 715-2387
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
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With Copies to:
Joseph Rinaldi
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
(212) 450-4000
This statement is filed in connection with (check the appropriate box):
a. |_| The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b. |_| The filing of a registration statement under the Securities Act of 1933.
c. |X| A tender offer.
d. |_| None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: |_|
CALCULATION OF FILING FEE
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Transaction Valuation* Amount of Filing Fee**
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$1,804,813,865 $360,963
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* Calculated by multiplying $23.50, the per share tender offer price, by
76,800,590, which represents (i) the sum of the number of shares of common
stock outstanding on October 21, 1999 (excluding shares of common stock
already owned by Delta Air Lines, Inc. and its affiliates) plus (ii) the
2,346,814 shares of common stock subject to options which were vested and
exercisable as of October 21, 1999.
** Calculated as 1/50 of 1% of the transaction value.
|X| Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount previously paid: $360,963 Filing party: Delta Air Lines, Inc.
Form or registration no.: Schedule 14D-1 Date filed: October 22, 1999
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<PAGE>
INTRODUCTION
This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule
13E-3") is being filed by (i) Delta Air Lines, Inc., a Delaware corporation
("Delta"), (ii) Kentucky Sub, Inc., a Kentucky corporation ("Kentucky Sub")
and an indirect wholly-owned subsidiary of Delta and (iii) Delta Air Lines
Holdings, Inc., a Delaware corporation ("Delta Holdings") and a direct
wholly-owned subsidiary of Delta, pursuant to Section 13(e) of the Securities
Exchange Act of 1934, as amended, and Rule 13e-3 thereunder in connection with
the tender offer by Kentucky Sub for all of the issued and outstanding shares
(the "Shares") of common stock, no par value, of Comair Holdings, Inc.
("Comair") upon the terms and subject to the conditions set forth in the Offer
to Purchase dated October 22, 1999 (the "Offer to Purchase") and the related
Letter of Transmittal (which together constitute the "Offer"), copies of which
are filed as Exhibits (d)(1) and (d)(2) hereto, respectively.
The following Cross Reference Sheet, prepared pursuant to General
Instruction F to Schedule 13E-3, shows the location in the Tender Offer
Statement on Schedule 14D-1 filed by Delta, Kentucky Sub and Delta Holdings
(the "Schedule 14D-1") with the Securities and Exchange Commission on the date
hereof of the information required to be included in this Schedule 13E-3. The
information set forth in the Schedule 14D-1, including all exhibits thereto,
is hereby expressly incorporated herein by reference as set forth in the Cross
Reference Sheet and the responses in this Schedule 13E-3, and such responses
are qualified in their entirety by reference to the information contained in
the Offer to Purchase and the schedules thereto.
The information contained in this Schedule 13E-3 concerning Comair,
including, without limitation, the deliberations of Comair's Board of
Directors in connection with the transaction, the opinion of Comair's
financial advisor and Comair's capital structure and historical financial
statements and projections, was supplied by Comair. None of Delta, Kentucky
Sub or Delta Holdings takes responsibility for the accuracy of such
information.
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<PAGE>
CROSS REFERENCE SHEET
WHERE LOCATED
ITEM IN SCHEDULE 13E-3 IN SCHEDULE 14D-1
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Item 1(a)..................................................... Item 1(a)
Item 1(b)..................................................... Item 1(b)
Item 1(c)..................................................... Item 1(c)
Item 1(d)..................................................... *
Item 1(e)..................................................... *
Item 1(f)..................................................... *
Item 2(a)..................................................... Item 2(a)
Item 2(b)..................................................... Item 2(b)
Item 2(c)..................................................... Item 2(c)
Item 2(d)..................................................... Item 2(d)
Item 2(e)..................................................... Item 2(e)
Item 2(f)..................................................... Item 2(f)
Item 2(g)..................................................... Item 2(g)
Item 3(a)(1).................................................. Item 3(a)
Item 3(a)(2).................................................. Item 3(b)
Item 3(b)..................................................... *
Item 4........................................................ *
Item 5........................................................ Item 5
Item 6(a)..................................................... Item 4(a)
Item 6(b)..................................................... *
Item 6(c)..................................................... Item 4(b)
Item 6(d)..................................................... Item 4(c)
Item 7(a)..................................................... Item 5
Item 7(b)..................................................... *
Item 7(c)..................................................... *
Item 7(d)..................................................... *
Item 8........................................................ *
Item 9........................................................ *
Item 10....................................................... Item 6
Item 11....................................................... Item 7
Item 12....................................................... *
Item 13....................................................... *
Item 14....................................................... *
Item 15(a).................................................... *
Item 15(b).................................................... Item 8
Item 16....................................................... Item 10(f)
Item 17....................................................... Item 11
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* The Item is located in the Schedule 13E-3 only.
3
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Item 1. Issuer and Class of Security Subject to the Transaction
(a)-(c) The response to Item 1(a)-(c) of the Schedule 14D-1 is
incorporated herein by reference.
(d) The information set forth in the Offer to Purchase under "Special
Factors--The Merger Agreement", "The Tender Offer--Price Range of Shares;
Dividends" and "The Tender Offer--Dividends and Distributions" is incorporated
herein by reference.
(e) Not applicable.
(f) The information set forth in the Offer to Purchase under "The Tender
Offer -- Certain Information Concerning Comair--Repurchases of Shares by
Comair" is incorporated herein by reference.
Item 2. Identity and Background
(a)-(g) This Statement is filed by Delta, Kentucky Sub and Delta Holdings.
The response to Item 2 of the Schedule 14D-1 is incorporated herein by
reference.
Item 3. Past Contacts, Transactions or Negotiations
(a)(1) and (a)(2) The response to Item 3 of the Schedule 14D-1 is
incorporated herein by reference.
(b) Not applicable.
Item 4. Terms of the Transaction
(a) The information set forth in the Offer to Purchase on the cover page
thereof and under "Introduction", "Special Factors--Background of the Offer",
"Special Factors--The Merger Agreement", "The Tender Offer--Terms of the
Offer", "The Tender Offer--Acceptance for Payment and Payment for Shares",
"The Tender Offer--Procedures for Accepting the Offer and Tendering Shares",
"The Tender Offer--Withdrawal Rights", "The Tender Offer--Dividends and
Distributions", "The Tender Offer--Certain Conditions of the Offer" and "The
Tender Offer--Certain Legal Matters; Regulatory Approvals" is incorporated
herein by reference.
(b) The information set forth in the Offer to Purchase under "Special
Factors--Interests of Certain Persons in the Offer and the Merger" is
incorporated herein by reference.
Item 5. Plans or Proposals of the Issuer or Affiliate
(a)-(g) The response to Item 5 of the Schedule 14D-1 is incorporated
herein by reference.
Item 6. Source and Amount of Funds or Other Consideration
(a) The response to Item 4(a) of the Schedule 14D-1 is incorporated
herein by reference.
(b) The information set forth in the Offer to Purchase under "The Tender
Offer--Fees and Expenses" is incorporated herein by reference.
(c) The response to Item 4(b) of the Schedule 14D-1 is incorporated
herein by reference.
(d) Not applicable.
4
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Item 7. Purpose(s), Alternatives, Reasons and Effects
(a) The information set forth under "Special Factors--Purpose and
Structure of the Offer and the Merger; Reasons of Delta for the Offer and the
Merger", "Special Factors--Plans for Comair after the Offer and the Merger"
and "Special Factors--Position of Delta, Kentucky Sub and Delta Holdings
Regarding Fairness of the Offer and the Merger" is incorporated herein by
reference.
(b) The information set forth in the Offer to Purchase under "Special
Factors--Background of the Offer", "Special Factors--Recommendation of the
Comair Board; Fairness of the Offer and the Merger" and "Special
Factors--Purpose and Structure of the Offer and the Merger; Reasons of Delta
for the Offer and the Merger" is incorporated herein by reference.
(c) The information set forth in the Offer to Purchase under
"Introduction", "Special Factors--Background of the Offer", "Special
Factors--Recommendation of the Comair Board; Fairness of the Offer and the
Merger", "Special Factors--Purpose and Structure of the Offer and the Merger;
Reasons of Delta for the Offer and the Merger", "Special Factors--Position of
Delta, Kentucky Sub and Delta Holdings Regarding Fairness of the Offer and the
Merger" and "Special Factors--Plans for Comair After the Offer and the Merger"
is incorporated herein by reference.
(d) The information set forth in the Offer to Purchase under
"Introduction", "Special Factors--Background of the Offer", "Special
Factors--Recommendation of the Comair Board; Fairness of the Offer and the
Merger", "Special Factors--Purpose and Structure of the Offer and the Merger;
Reasons of Delta for the Offer and the Merger", "Special Factors--Position of
Delta, Kentucky Sub and Delta Holdings Regarding Fairness of the Offer and the
Merger", "Special Factors--Plans for Comair After the Offer and the Merger",
"Special Factors--Interests of Certain Persons in the Offer and the Merger",
"The Tender Offer--Certain United States Federal Income Tax Consequences" and
"The Tender Offer--Certain Effects of the Offer" is incorporated herein by
reference.
Item 8. Fairness of the Transaction
(a)-(e) The information set forth in the Offer to Purchase under
"Introduction", "Special Factors--Background of the Offer", "Special
Factors--Recommendation of the Comair Board; Fairness of the Offer and the
Merger", "Special Factors--Position of Delta, Kentucky Sub and Delta Holdings
Regarding Fairness of the Offer and the Merger" and "Special Factors--Purpose
and Structure of the Offer and the Merger; Reasons of Delta for the Offer and
the Merger" is incorporated herein by reference.
(f) Not applicable.
Item 9. Reports, Opinions, Appraisals And Certain Negotiations
(a)-(c) The information set forth in the Offer to Purchase under "Special
Factors--Background of the Offer", "Special Factors--Recommendation of the
Comair Board; Fairness of the Offer and the Merger", "Special Factors--Opinion
of Financial Advisor to the Comair Board" and "Special Factors--Position of
Delta, Kentucky Sub and Delta Holdings Regarding Fairness of the Offer and the
Merger" and Exhibits (b)(1) and (b)(2) hereto is incorporated herein by
reference.
Item 10. Interest in Securities of the Issuer
(a)-(b) The response to Item 6 of the Schedule 14D-1 is incorporated
herein by reference.
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Item 11. Contracts, Arrangements or Understandings with Respect to the Issuer's
Securities
The response to Item 7 of the Schedule 14D-1 is incorporated herein by
reference.
Item 12. Present Intention and Recommendation of Certain Persons with Regard
to the Offer and the Merger
(a)-(b) The information set forth in the Offer to Purchase under
"Introduction", "Special Factors--Background of the Offer", "Special
Factors--Recommendation of the Comair Board; Fairness of the Offer and the
Merger" and "Special Factors--Interests of Certain Persons in the Offer and
the Merger" is incorporated herein by reference.
Item 13. Other Provisions of the Offer and the Merger
(a) The information set forth in the Offer to Purchase under "Special
Factors--Rights of Shareholders in the Offer and the Merger", "Special
Factors--The Merger Agreement" and in Exhibit (e) to this Schedule 13E-3 is
incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
Item 14. Financial Information
(a) The information set forth in the Offer to Purchase under "The Tender
Offer--Certain Information Concerning Comair" and "The Tender Offer--Price
Range of Shares; Dividends" is incorporated herein by reference. In addition,
(i) Comair's audited consolidated financial statements as of and for the
fiscal years ended March 31, 1999 and March 31, 1998 which are included in
Comair's Annual Report on Form 10-K for the fiscal year ended March 31, 1999
and (ii) Comair's unaudited consolidated balance sheets as of June 30, 1999
and March 31, 1999, Comair's consolidated statements of income and cash flows
for the three months ended June 30, 1999 and 1998, and Comair's consolidated
statement of shareholders' equity for the three months ended June 30, 1999,
each of which is included in Comair's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1999, are each incorporated herein by reference.
(b) Not applicable.
Item 15. Persons and Assets Employed, Retained or Utilized
(a) The information set forth in the Offer to Purchase under "Special
Factors--Background of the Offer", "Special Factors--Recommendation of the
Comair Board; Fairness of the Offer and the Merger", "Special Factors--Plans
for Comair After the Offer and the Merger", "Special Factors--Interests of
Certain Persons in the Offer and the Merger", "The Tender Offer--Financing of
the Offer and the Merger" and "The Tender Offer--Certain Effects of the Offer"
is incorporated herein by reference.
(b) The response to Item 8 of the Schedule 14D-1 is incorporated herein
by reference.
Item 16. Additional Information
The responses to Items 10(e) and 10(f) of the Schedule 14D-1 are
incorporated herein by reference.
6
<PAGE>
Item 17. Material to Be Filed as Exhibits
(a)(1) Term Loan Commitment Letter from Chase Securities Inc. and The
Chase Manhattan Bank to Delta dated as of October 17, 1999.*
(b)(1) Opinion of Morgan Stanley & Co. Incorporated dated October 17,
1999.
(b)(2) Presentation of Morgan Stanley & Co. Incorporated dated October
16, 1999.
(c)(1) Stock Purchase Agreement dated June 11, 1986, between Delta and
Comair, Inc.*
(c)(2) Agreement and Plan of Merger, dated as of October 17, 1999, among
Comair, Delta and Kentucky Sub (incorporated by reference to
Exhibit 3 of Amendment No. 3 to the Statement on Schedule 13D
filed by Delta and Delta Holdings on October 18, 1999).
(d)(1) Offer to Purchase dated October 22, 1999.*
(d)(2) Letter of Transmittal sent to holders of Shares.*
(d)(3) Notice of Guaranteed Delivery.*
(d)(4) Letter from Goldman, Sachs & Co. to Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.*
(d)(5) Letter to Clients for Use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.*
(d)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.*
(d)(7) Summary Advertisement as published in The Wall Street Journal on
October 22, 1999.*
(d)(8) Text of Press Release issued by Delta on October 18, 1999.*
(e) Subtitle 271B.13 of the Kentucky Revised Statutes relating to
dissenting shareholders.
(f) Not applicable.
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* Incorporated by reference to the Statement on Schedule 14D-1 filed by
Delta, Delta Holdings and Kentucky Sub on October 22, 1999.
7
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and
correct.
October 22, 1999
DELTA AIR LINES, INC.
By: /s/ Edward H. West
Name: Edward H. West
Title: Executive Vice President
and Chief Financial
Officer
DELTA AIR LINES HOLDINGS, INC.
By: /s/ Leslie P. Klemperer
-----------------------------------
Name: Leslie P. Klemperer
Title: Vice President and Secretary
KENTUCKY SUB, INC.
By: /s/ Dean C. Arvidson
-----------------------------------
Name: Dean C. Arvidson
Title: Secretary
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
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(b)(1) Opinion of Morgan Stanley & Co. Incorporated dated October 17, 1999.
(b)(2) Presentation of Morgan Stanley & Co. dated October 16, 1999.
(e) Subtitle 271B.13 of the Kentucky Revised Statutes relating to
dissenting shareholders.
EXHIBIT (b)(1)
October 17, 1999
Board of Directors
Comair Holdings, Inc.
P.O. Box 75021
Cincinnati, OH 45275
Members of the Board:
We understand that Comair Holdings, Inc. ("Comair" or the "Company"), Delta Air
Lines, Inc. ("Delta") and Kentucky Sub, Inc., an indirect wholly owned
subsidiary of Delta ("Acquisition Sub"), propose to enter into an Agreement and
Plan of Merger, dated October 17, 1999 (the "Merger Agreement"), which
provides, among other things, for (i) the commencement by Acquisition Sub of a
tender offer (the "Tender Offer") for all outstanding shares of common stock,
no par value, of Comair (the "Common Stock") for $23.50 per share net to the
seller in cash, and (ii) the subsequent merger (the "Merger") of Acquisition
Sub with and into Comair. Pursuant to the Merger, Comair will become an
indirect wholly owned subsidiary of Delta and each outstanding share of Common
Stock of Comair, other than shares held in treasury or held by Delta or any
subsidiary of Delta or as to which dissenters' rights have been perfected, will
be converted into the right to receive $23.50 per share in cash. The terms and
conditions of the Tender Offer and the Merger are more fully set forth in the
Merger Agreement.
You have asked for our opinion as to whether the consideration to be received
by the holders of shares of Common Stock pursuant to the Merger Agreement is
fair from a financial point of view to such holders (other than Delta and its
affiliates).
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning the Company prepared by the management
of the Company;
(iii) reviewed certain financial projections prepared by the management of
the Company;
(iv) discussed the past and current operations and financial condition
and the prospects of the Company, including the Company's expected
future relationship with Delta, with senior executives of the
Company;
(v) reviewed the reported prices and trading activity for the Common
Stock;
<PAGE>
(vi) compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(viii) participated in discussions and negotiations among representatives
of the Company and Delta and their financial and legal advisors;
(ix) reviewed the Merger Agreement and certain related documents; and
(x) performed such other analyses and considered such other factors as
we have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company. We
have assumed that the Tender Offer and the Merger will be consummated on the
terms set forth in the Merger Agreement. We have not made any independent
valuation or appraisal of the assets or liabilities of the Company, nor have we
been furnished with any such appraisals. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party, nor did we have discussions with any party
other than Delta with respect to the acquisition of the Company or any of its
assets.
We have acted as financial advisor to the Board of Directors of the Company in
connection with this transaction and will receive a fee for our services. In
addition, Morgan Stanley provides no advice or recommendation as to whether or
not holders of shares of Common Stock should participate in the Tender Offer.
In the past, Morgan Stanley has provided financial advisory and financing
services for Delta and has received fees for the rendering of these services.
Based on the foregoing we are of the opinion on the date hereof that the
consideration to be received by the holders of shares of Common Stock pursuant
to the Merger Agreement is fair from a financial point of view to such holders
(other than Delta and its affiliates).
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Mark D. Eichorn
--------------------------------
Mark D. Eichorn
Principal
EXHIBIT (e)
KENTUCKY REVISED STATUTES
TITLE XXIII. PRIVATE CORPORATIONS AND ASSOCIATIONS
CHAPTER 271B. BUSINESS CORPORATIONS
SUBTITLE 13. DISSENTERS' RIGHTS
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
271B.13-010 Definitions for subtitle
As used in this subtitle:
(1) "Corporation" means the issuer of the shares held by a dissenter, except
that in the case of a merger where the issuing corporation is not the surviving
corporation, then, after consummation of the merger, "corporation" shall mean
the surviving corporation.
(2) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under KRS 271B.13-020 and who exercises that right when and in the
manner required by KRS 271B.13-200 to 271B.13-280.
(3) "Fair value," with respect to a dissenter's shares, means the value of the
shares immediately before the effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or depreciation in anticipation
of the corporate action unless exclusion would be inequitable. In any
transaction subject to the requirements of KRS 271B.12-210 or exempted by KRS
271B.12-220(2), "fair value" shall be at least an amount required to be paid
under KRS 271B.12-220(2) in order to be exempt from the requirements of KRS
271B.12-210.
(4) "Interest" means interest from the effective date of the corporate action
until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are registered
in the records of a corporation or the beneficial owner of shares to the extent
of the rights granted by a nominee certificate on file with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
<PAGE>
shareholder.
271B.13-020 Right to dissent
(1) A shareholder shall be entitled to dissent from, and obtain payment of the
fair value of his shares in the event of, any of the following corporate
actions:
(a) Consummation of a plan of merger to which the corporation is a party:
1. If shareholder approval is required for the merger by KRS 271B.11-030 or
the articles of incorporation and the shareholder is entitled to vote on the
merger; or
2. If the corporation is a subsidiary that is merged with its parent under
KRS 271B.11-040;
(b) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all
of the net proceeds of the sale will be distributed to the shareholders within
one (1) year after the date of sale;
(d) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
1. Alters or abolishes a preferential right of the shares to a
distribution or in dissolution;
2. Creates, alters, or abolishes a right in respect of redemption, including
a provision respecting a sinking fund for the redemption or repurchase, of the
shares;
3. Excludes or limits the right of the shares to vote on any matter other
than a limitation by dilution through issuance of shares or other securities
with similar voting rights; or
4. Reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional share so created is to be acquired for cash under KRS
271B.6-040;
<PAGE>
(e) Any transaction subject to the requirements of KRS 271B.12-210 or
exempted by KRS 271B.12-220(2); or
(f) Any corporate action taken pursuant to a shareholder vote to the extent
the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for his shares under
this chapter shall not challenge the corporate action creating his entitlement
unless the action is unlawful or fraudulent with respect to the shareholder or
the corporation.
271B.13-030 Dissent by nominees and beneficial owners
(1) A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he shall dissent with respect to all
shares beneficially owned by any one (1) person and notify the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection
shall be determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares held on
his behalf only if:
(a) He submits to the corporation the record shareholder's written consent to
the dissent not later than the time the beneficial shareholder asserts
dissenters' rights; and
(b) He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
271B.13-200 Notice of dissenters' rights
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert
dissenters' rights under this subtitle and the corporation shall undertake to
provide a copy of this subtitle to any shareholder entitled to vote at the
shareholders' meeting upon request of that shareholder.
(2) If corporate action creating dissenters' rights under KRS 271B.13-020 is
taken without a vote of shareholders, the
<PAGE>
corporation shall notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in KRS 271B.13-220.
271B.13-210 Notice of intent to demand payment
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, a shareholder
who wishes to assert dissenters' rights:
(a) Shall deliver to the corporation before the vote is taken written notice
of his intent to demand payment for his shares if the proposed action is
effectuated; and
(b) Shall not vote his shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1) of
this section shall not be entitled to payment for his shares under this
chapter.
271B.13-220 Dissenters' notice
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of KRS 271B.13-210.
(2) The dissenters' notice shall be sent no later than ten (10) days after the
date the proposed corporate action was authorized by the shareholders, or, if
no shareholder authorization was obtained, by the board of directors, and
shall:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
(d) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty (30), nor more than sixty (60) days
after the date the notice provided in subsection (1) of this section is
delivered; and
<PAGE>
(e) Be accompanied by a copy of this subtitle.
271B.13-230 Duty to demand payment
(1) A shareholder who is sent a dissenters' notice described in KRS 271B.13-
220 shall demand payment, certify whether he acquired beneficial ownership of
the shares before the date required to be set forth in the dissenters' notice
pursuant to subsection (2)(c) of KRS 271B.13-220, and deposit his certificates
in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits his share certificates
under subsection (1) of this section shall retain all other rights of a
shareholder until these rights are cancelled or modified by the taking of the
proposed corporate action.
(3) A shareholder who does not demand payment or deposit his share certificates
where required, each by the date set in the dissenters' notice, shall not be
entitled to payment for his shares under this subtitle.
271B.13-240 Share restrictions
(1) The corporation may restrict the transfer of uncertificated shares from the
date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under KRS 271B.13-260.
(2) The person for whom dissenters' rights are asserted as to uncertificated
shares shall retain all other rights of a shareholder until these rights are
cancelled or modified by the taking of the proposed corporate action.
271B.13-250 Payment
(1) Except as provided in KRS 271B.13-270, as soon as the proposed corporate
action is taken, or upon receipt of a payment demand, the corporation shall pay
each dissenter who complied with KRS 271B.13-230 the amount the corporation
estimates to be the fair value of his shares, plus accrued interest.
(2) The payment shall be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year ending not
more than sixteen (16) months before the date of payment, an income statement
for that year, a statement of changes in shareholders' equity for that year,
and the latest available interim financial statements, if any;
<PAGE>
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated; and
(d) A statement of the dissenter's right to demand payment under KRS
271B.13-280.
271B.13-260 Failure to take action
(1) If the corporation does not take the proposed action within sixty (60) days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under KRS 271B.13-220 and repeat the payment demand
procedure.
271B.13-270 After-acquired shares
(1) A corporation may elect to withhold payment required by KRS 271B.13-250
from a dissenter unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action.
(2) To the extent the corporation elects to withhold payment under subsection
(1) of this section, after taking the proposed corporate action, it shall
estimate the fair value of the shares, plus accrued interest, and shall pay
this amount to each dissenter who agrees to accept it in full satisfaction of
his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest
was calculated, and a statement of the dissenter's right to demand payment
under KRS 271B.13-280.
271B.13-280 Procedure if shareholder dissatisfied with payment or
offer
(1) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate (less any payment under KRS 271B.13-250), or reject the
corporation's offer under KRS 271B.13-270 and demand payment of the fair value
of his shares and interest due, if:
(a) The dissenter believes that the amount paid under KRS
<PAGE>
271B.13-250 or offered under KRS 271B.13-270 is less than the fair value of his
shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under KRS 271B.13-250 within sixty
(60) days after the date set for demanding payment; or
(c) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions imposed
on uncertificated shares within sixty (60) days after the date set for
demanding payment.
(2) A dissenter waives his right to demand payment under this section unless he
shall notify the corporation of his demand in writing under subsection (1) of
this section within thirty (30) days after the corporation made or offered
payment for his shares.
JUDICIAL APPRAISAL OF SHARES
271B.13-300 Court action
(1) If a demand for payment under KRS 271B.13-280 remains unsettled, the
corporation shall commence a proceeding within sixty (60) days after receiving
the payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the
proceeding within the sixty (60) day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the circuit court of the
county where a corporation's principal office (or, if none in this state, its
registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic
corporation merged with or whose shares were acquired by the foreign
corporation was located.
(3) The corporation shall make all dissenters (whether or not residents of this
state) whose demands remain unsettled parties to the proceeding as in an action
against their shares and all parties shall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced under
subsection (2) of this section shall be plenary and exclusive. The court may
appoint one (1) or more persons as
<PAGE>
appraisers to receive evidence and recommend decision on the question of fair
value. The appraisers have the powers described in the order appointing them,
or in any amendment to it. The dissenters shall be entitled to the same
discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding shall be entitled to
judgment:
(a) For the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation; or
(b) For the fair value, plus accrued interest, of his after-acquired shares
for which the corporation elected to withhold payment under KRS 271B.13- 270.
271B.13-310 Court costs and counsel fees
(1) The court in an appraisal proceeding commenced under KRS 271B.13-300 shall
determine all costs of the proceeding, including the reasonable compensation
and expenses of appraisers appointed by the court. The court shall assess the
costs against the corporation, except that the court may assess costs against
all or some of the dissenters, in amounts the court finds equitable, to the
extent the court finds the dissenters acted arbitrarily, vexatiously, or not in
good faith in demanding payment under KRS 271B.13- 280.
(2) The court may also assess the fees and expenses of counsel and experts for
the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters, if the
court finds the corporation did not substantially comply with the requirements
of KRS 271B.13-200 to 271B.13-280; or
(b) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this subtitle.
(3) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court
may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
EXHIBIT (b)(2)
PROJECT BENGALS
Fairness Opinion Materials
October 16, 1999
<PAGE>
PROJECT BENGALS
The following material is being provided to the Board of Directors of Comair
Holdings, Inc. (the "Company") in connection with a presentation made by Morgan
Stanley & Co. Incorporated at a meeting held to evaluate the acquisition
proposal made by Delta Airlines, Inc. and should be reviewed and considered as
a part of such presentation. The following material has been prepared solely
for the use by the Board of Directors of the Company in connection with its
evaluation of the foregoing acquisition proposal and may not be relied upon by
any other persons for any purpose.
<PAGE>
PROJECT BENGALS
Overview of Valuation Methodology
Comparable
Companies
Analysis
- ----------
o Universe of comparable companies deemed relevant for purposes of this
analysis includes four other publicly traded regional airline companies
o Most relevant public market statistic is multiples of 2000 estimated
earnings per share
Discounted
Future
Stock Price
Analysis
- -----------
o Present value of future C-Company stock prices implied by a range of
current public market valuation multiples and estimated earnings in CY2003
o Discount rates: 13.0% to 15.0% based on analysis of C-Company's
theoretical cost of equity
Precedent
Transaction
Premiums Paid
- -------------
o Review of valuation premiums paid in precedent airline industry
transactions
o Review of premiums paid in selected "going private" transactions over the
past five years
Precedent
Transaction
Multiples
- ---------
o Review of valuation multiples and premium paid in D-Company's acquisition
of ASA Holdings
Discounted
Cash Flow
Analysis
- --------
o Utilized 5 years of projected cash flows (2000-2004) for four projection
scenarios
o Projected results under current C-Company proposal o Projected results
under D-Company proposal adjusted for 14% margins o Projected results
under current D-Company proposal o Projected results under alternative
business plan
o Discount rates: 11.0% to 13.0% based on analysis of weighted average cost
of capital of C-Company
o Terminal value methodology: EBIT multiple range of 6x-8x applied to
terminal year EBIT
<PAGE>
PROJECT BENGALS
Comparative Margins
[Graphics omitted--
data below depicts the graphical presentations
of Comparative Margins]
Comparable Companies vs.
C Blended 2001 Margin(1) %
- ------------------------ -----
C Proposal .............. 25.5
SkyWest ................. 17.0
Atlantic Coast Airlines . 16.7
D Proposal (14%) ........ 15.4
D Proposal (Current) .... 14.2
Alternative Business Plan 12.6
Mesaba Holdings Inc. .... 10.2
Mesa Air Group Inc. ..... 8.7
Comparable vs.
C Blended 2003 Margin(1) %
- ------------------------ -----
C Proposal .............. 23.5
SkyWest ................. 17.0
Atlantic Coast Airlines . 16.7
D Proposal (14%) ........ 15.2
D Proposal (Current) .... 13.5
Alternative Business Plan 13.5
Mesaba Holdings Inc. .... 10.2
Mesa Air Group Inc. ..... 8.7
Note: (1) C blended projected FY 2001 and 2003 operating margins vs. LTM
operating margins for comparable companies.
<PAGE>
PROJECT BENGALS
Comparative Trading Performance
[Graphics omitted--
data below depicts the graphical presentations
of Comparative Trading Performance]
1999 Price/Earnings(1)
- ----------------------
Atlantic Coast
Airlines HLD ........... 15.0
C ........................ 12.1 Horizontal lines drawn--
SkyWest Inc. ............. 10.7 Mean: 10.8x
Mesa Air Group Inc. ...... 9.0 Median: 10.7x
Mesaba Holdings Inc. ..... 7.1
2000 Price/Earnings(2)
- ----------------------
C ........................ 10.6x
Atlantic Coast
Airlines HLD ........... 10.4x Horizontal lines drawn--
SkyWest Inc. ............. 9.2x Median: 9.2x
Mesa Air Group Inc. ...... 7.1x Mean: 8.7x
Mesaba Holdings Inc. ..... 6.1x
Projected 5-Year EPS Growth(3)
- ------------------------------
Mesaba Holdings Inc. ..... 18.0
SkyWest Inc. ............. 17.0
Atlantic Coast Horizontal lines drawn--
Airlines HLD ........... 17.0 Median: 17.0%
C ........................ 17.0 Mean: 16.0%
Mesa Air Group Inc. ...... 13.0
Price/Earnings to Growth(4)
- ---------------------------
C ........................ 0.62x
Atlantic Coast
Airlines HLD ........... 0.61x Horizontal lines drawn--
Mesa Air Group Inc. ...... 0.55x Median: 0.55x
SkyWest Inc. ............. 0.54x Mean: 0.53x
Mesaba Holdings Inc. ..... 0.34x
Notes: (1) Based on calendarized 1999E EPS; Source: IBES mean estimates.
(2) Based on calendarized 2000E EPS; Source: IBES mean estimates.
(3) Source: IBES mean estimates.
(4) Based on calendarized 2000E EPS; Source: IBES mean estimates.
<PAGE>
PROJECT BENGALS
Overview of Financial Projections(1)
($MM)
[Graphical legend omitted]
[Graphics omitted--
data below depicts the graphical presentations
of the Overview of Financial Projections]
Total Revenues/(Growth)
- -----------------------
1997 564
1998 651
1999 763
2000 894 884 655 876
2001 1021 924 753 1017
2002 1208 1117 889 1291
2003 1412 1362 1054 1499
EBITDA (Margins)
- ----------------
1997 138
1998 187
1999 235
2000 269 264 129 193
2001 300 182 147 172
2002 351 220 172 205
2003 384 260 195 262
EBIT/(Margins)
- --------------
1997 116
1998 161
1999 204
2000 235 230 95 159
2001 260 142 107 128
2002 303 172 124 149
2003 331 208 142 202
Earnings Per Share
- ------------------
1997 0.75
1998 1.01
1999 1.33
2000 1.52 1.57 1.5 0.66 0.5 1.08
2001 1.74 1.74 0.92 0.73 0.6 0.86
2002 2 2.06 1.1 0.86 0.7 1
2003 2.3 2.28 1.34 0.99 0.8 1.36
Note: (1) Based on management projections.
<PAGE>
PROJECT BENGALS
Preliminary Valuation Analysis
[Graphic omitted--
data below depicts the graphical presentation
of the Preliminary Valuation Analysis] [Graphic legend omitted]
Current: $17.94
(as of 10/15/99) Transaction Price: $23.50
---------------- -------------------------
1-Yr Historical
Trading Range $14-----------------------$29
Comparable $12-----------------------$19
Company $6-----------------------$10
Analysis(1) $6----------------------- $9
$5----------------------- $8
Discounted $11-----------------------$19
Stock Price $7-----------------------$12
Analysis(2) $7-----------------------$11
$5----------------------- $8
Precedent $15-----------------------$26
Premiums Paid(3) $8-----------------------$14
$8-----------------------$13
$6-----------------------$11
Precedent Transaction
Analysis(4) $17-----------------------$22
Preliminary $21-----------------------$27
DCF $15-----------------------$19
Analysis(5) $12-----------------------$16
$10-----------------------$13
Notes: (1) Based on 2000 P/E, multiples of 7.0x to 11.0x; EPS estimates based
on management projections.
(2) Based on 7.0x to 11.0x P/E multiples applied to 2004 EPS. Pro Forma
stock price discounted back at 13.0% to 15.0%
(3) Based on 30.0% to 40.0% premium applied to comparable company
valuation.
(4) Based on premium and multiples paid in D/ASA transaction.
(5) Assumes EBIT multiples of 6x to 8x and discount rate range
of 11%-13%.
<PAGE>
PROJECT BENGALS
Summary of Valuation of C
($MM)
<TABLE>
Trading Valuation
- -----------------
Equity Value
------------------------------------------
Multiple Range Aggregate Per Share
2000E ----------------- -------------------- -----------------
CY Earnings(1) Low High Low High Low High
------------- ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
C Proposal $1.69 7.0x 11.0x $1,163 $1,827 $11.81 $18.57
D Proposal (14%) $0.89 7.0x 11.0x $605 $951 $6.20 $9.75
D Proposal (Current) $0.71 7.0x 11.0x $488 $767 $4.96 $7.80
Alternative Business Plan $0.83 7.0x 11.0x $571 $898 $5.81 $9.12
Discounted Stock Price Analysis(2)
- ----------------------------------
Equity Value
------------------------------------------
Multiple Range Aggregate Per Share
2003 ----------------- -------------------- -----------------
CY Earnings(1) Low High Low High Low High
------------- ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
C Proposal $2.49 7.0x - 11.0x $1,127 - $1,866 $11.45 - $18.96
D Proposal (14%) $1.53 7.0x - 11.0x $693 - $1,147 $7.04 - $11.66
D Proposal (Current) $1.08 7.0x - 11.0x $491 - $813 $4.99 - $8.26
Alternative Business Plan $1.46 7.0x - 11.0x $660 - $1,093 $6.71 - $11.11
Precedent Premiums Paid
- -----------------------
Equity Value
------------------------------------------
Premium Range Aggregate Per Share
Current ----------------- -------------------- -----------------
Price(3) Low High Low High Low High
-------- ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C Proposal $11.81 $18.57 30.0% - 40.0% $1,511 - $2,558 $15.36 - $25.99
D Proposal (14%) $6.20 $9.75 30.0% - 40.0% $786 - $1,331 $8.07 - $13.65
D Proposal (Current) $4.96 $7.80 30.0% - 40.0% $635 - $1,074 $6.45 - $10.92
Alternative Business Plan $5.81 $9.12 30.0% - 40.0% $743 - $1,257 $7.55 - $12.77
Discounted Cash Flow Analysis(4)
- --------------------------------
Equity Value
------------------------------------------
WACC EBIT Multiple Aggregate Per Share
----------------- ----------------- -------------------- -----------------
Low High Low High Low High Low High
------ ------ ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C Proposal 11.0% 13.0% 6.0x 8.0x $2,119 - $2,708 $21.20 $27.09
D Proposal (14%) 11.0% 13.0% 6.0x 8.0x $1,465 - $1,860 $14.66 $18.61
D Proposal (Current) 11.0% 13.0% 6.0x 8.0x $1,004 - $1,259 $10.04 $12.60
Alternative Business Plan 11.0% 13.0% 6.0x 8.0x $1,215 - $1,563 $12.15 $15.64
Notes: (1) Based on Management Projections.
(2) Pro Forma 2003 share price discounted at 13.0% to 15.0%.
(3) Implied trading valuation price.
(4) Based on discount rates of 11.0% to 13.0%.
</TABLE>
<PAGE>
PROJECT BENGALS
Valuation Based on A-Company Transaction
A-Company Valuation
- -------------------
Transaction Date February 15, 1999
Transaction Price $34.00
Premium to Market Price 6.5%
P/E Multiples based on IBES:
Price/EPS-10 months fwd. 12.8x
Price/EPS-22 months fwd. 11.1x
P/E Multiples based on Revised
Earnings Estimates:
Price/EPS-10 months fwd. 26.2x
Price/EPS-22 months fwd. 21.9x
Aggregate Value Multiples:
Agg. Value/LTM EBITDA 6.6x
Agg. Value/LTM EBIT 8.4x
Implied C-Company Valuation
- ---------------------------
Operating Value Per
Methodology Data Multiple Share
- ----------- ---- -------- -----
Premium to Market $17.94 6.5% $19.11
P/E Multiples based on IBES:
Price/EPS-10 months fwd. $1.52 12.8x $19.46
Price/EPS-22 months fwd. $1.83 11.1x $20.31
P/E Multiples based on Revised
Earnings Estimates:
D-Proposal (Current)
Price/EPS-10 months fwd. $0.67 26.2x $17.57
Price/EPS-22 months fwd. $0.77 21.9x $16.94
D-Proposal (14%)
Price/EPS-10 months fwd. $0.84 26.2x $21.96
Price/EPS-22 months fwd. $0.98 21.9x $21.42
Aggregate Value Multiples:
Agg. Value/LTM EBITDA $247 6.6x $19.34
Agg. Value/LTM EBIT $216 8.4x $21.27
