War Heats Up Between Mesa, Atlantic Coast

Collusion or Exaggeration?

In its complaint, ACA cites a Mesa conference call on Oct. 7 as proof that Mesa Chief Executive Jon Ornstein made contact with United executives before making the unsolicited bid for ACA. In the call, Ornstein mentioned that he had talked with United about Mesa's negotiations with ACA. Also, ACA said that Mesa has not been clear about the real reason it wants to take over ACA. According to ACA, the reason for the takeover is so that Mesa can shore up its balance sheet and eliminate a competitor for United, which Mesa relies on for a sizeable chunk of revenue.

"Mesa is having problems financing additional aircraft purchases, a cornerstone of its growth plans ... ACA believes that Mesa is seeking control of ACA so that Mesa can gain the use of ACA's cash on hand, which is expected to reach over $200 million by year end," said ACA. "Mesa's desire to acquire ACA so it can use the company's cash to resolve Mesa's own financial difficulties is material information that should have been disclosed to stockholders and the market."

While Ornstein wasn't explicit about the changes to the balance sheet as a result of the merger and hasn't directly addressed ACA's cash position, the CEO has been very public with his opinion that Mesa's biggest weakness is its ability to finance planes, reiterating this view in a conference call discussing the merger on Oct. 7. (He also mentioned this issue in an interview with TheStreet.com on Aug. 9.)

"The combination is well capitalized for future growth. As you know, right now, one of Mesa's biggest challenges and something we have been very frank about has been our ability to finance new aircraft," said Ornstein, on the Oct. 7 conference call. "Combining with Atlantic Coast, we feel very comfortable going forward that all of the aircraft that we currently have on order and those that we're contemplating ordering will become financeable."