Updated from 6 a.m. EDT
( UAUA) United Airlines and
announced Monday they reached a definitive agreement to merge in an all-stock transaction.
The deal creates the world's largest airline. United currently is the nation's No. 3 carrier when measured by traffic, while Continental is No. 4.
Continental shareholders will receive 1.05 shares of United common stock for each Continental common share they own, the airlines said in a press release Monday. United shareholders will own about 55% of the equity of the combined company and Continental shareholders will own about 45%.
The merger is valued at about $3 billion.
The holding company for the new airline will be named United Continental Holdings Inc. and the name of the airline will be United Airlines.
The airlines said together they serve more than 144 million passengers a year and fly to 370 destinations in 59 countries.
Annual revenue for the combined company on a pro forma basis would be about $29 billion and it would have an unrestricted cash balance of about $7.4 billion as of the end of first quarter 2010.
The merger is expected to deliver $1 billion to $1.2 billion in net annual synergies by 2013, the airlines said. Closing of the merger is expected in the fourth quarter.
Continental CEO Jeff Smisek will lead the new airline. Glen Tilton, UAL's CEO, will serve as a non-executive chairman.
The merger still needs approval from shareholders and antitrust regulators.
-- Reported by Joseph Woelfel in New York.
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