War Heats Up Between Mesa, Atlantic Coast

The war of words surrounding Mesa Airlines' (MESA Quote) unsolicited takeover bid for Atlantic Coast Airlines(ACA Quote) got a little uglier on Tuesday.

In a complaint filed with the U.S. District Court for the District of Columbia, ACA alleged that Mesa and UAL (UAL Quote) unit United are working together to try to replace ACA's board of directors. ACA also said that Mesa executives have engaged in questionable stock trades, have conflicts of interest at the board level and haven't been upfront with investors in explaining why they want to take over ACA.

"United is a participant in Mesa's consent solicitation and proposed transaction. ACA alleges that Mesa's proposed plan to acquire all of the outstanding shares of ACA's common stock is nothing more than an attempt by Mesa and its undisclosed backer, United, to prevent ACA from establishing an economically viable, low-fare, low-cost airline," said ACA, in a statement.

ACA's complaint went on to allege that, in addition to eliminating the potential for low-cost competition at Washington's Dulles Airport, where both United and Mesa would be operating, the merger would remove a key stumbling block that would allow United to emerge from bankruptcy. On July 28, ACA announced plans to reinvent itself as a low-cost carrier, unwilling to negotiate lower rates regarding its long-term contract to fly for United if and when United emerges from Chapter 11 protection.

While United said that it hoped to sign a deal "as soon as possible" to have Mesa fly from Dulles as a United Express partner, the carrier denied any role in Mesa's takeover bid. In a press release, United said, "It is absolutely untrue that we have had any involvement in Mesa's offer."

A Mesa spokesperson also downplayed the ACA complaint, calling it "completely expected" and dubbing it "an attempt to keep ATA shareholders from choosing the future direction of the company."