Continental Airlines' board of directors is meeting Wednesday to review a potential merger with United Airlines, and the carriers are expected to decide within a matter of days whether to combine operations, say people close to the situation.
As in 2008, when the carriers came close to completing a deal, United's quarterly financial results may sway the deliberations, observers said. Spokeswomen for United and Continental declined to comment on any aspect of the merger reports.
United likely bolstered its case for a merger by posting its strongest first-quarter results in a decade Tuesday, topping most of its peers and beating analysts' estimates, though the company reported a net loss. That result is in contrast to two years ago, when directors of Houston-based Continental decided to end talks after United posted poor financial results, sources said.
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But United's robust showing may complicate the carriers' efforts to wrap up a deal. United's shareholders could balk at any transaction that doesn't pay a hefty premium for the Chicago-based carrier, said analyst Hunter Keay of Stifel Nicolaus.
"We believe shares of United are undervalued, and we envision pushback from United equity holders should management propose a no-premium stock-swap transaction below $27 per share," Keay wrote in a research report Tuesday. United's stock closed at $20.51 Tuesday, down 8 percent on a day when Wall Street saw a broad decline. Keay said he thinks United shares are worth $33, with or without a merger.
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