Andy and Blue,
Continental readies to sell entire ExpressJet stake
By Julie MacIntosh
NEW YORK, May 1 (Reuters) - ExpressJet Holdings Inc. <XJT.N> on Thursday said its controlling stockholder, Continental Airlines Inc. <CAL.N>, could soon sell its entire majority stake, sending shares of the feeder airline down by nearly 10 percent.
ExpressJet's said in a regulatory filing that Continental could now divest its 53.1 percent stake in the company, worth almost $410 million before taxes at the time of the filing.
A lock-up period, during which Continental was barred from selling its 34 million shares of ExpressJet expired April 17, one year after Continental spun off ExpressJet in an initial public offering.
Continental has said it does not plan to remain a long-term investor in ExpressJet, which provides regional connecting flights for Continental to smaller cities.
Some industry analysts, however, expected Continental to hold onto its stake until the end of this year or later because its liquidity had improved, making it less necessary for Continental to convert its ExpressJet stock into cash.
Continental, the No. 5 U.S. air carrier, ended the first quarter with $1.18 billion in cash.
Credit Suisse First Boston analyst Jim Higgins said two weeks earlier that Continental's cash levels suggested the airline may not sell its stake until next year "unless exogenous events impair liquidity."
Continental spokesman Rahsaan Johnson said nothing specific had arisen that required Continental to build up its cash reserves.
"We want to be prepared to move when market conditions are right," Johnson said. He was not aware of whether talks had been held between Continental and any parties interested in buying all or part of the stake.
According to a shelf registration statement filed by ExpressJet with the U.S. Securities and Exchange Commission on Thursday, Continental would receive all the proceeds from the stock sales.
Shares of ExpressJet had dropped $1.11, or 9.6 percent, to $10.44 on the New York Stock Exchange by late morning.
ExpressJet has agreements to serve as the exclusive provider of regional jet service from Continental's hubs at least through 2006. Nearly all of ExpressJet's revenue comes from those agreements.
Continental's stake currently allows it to "control or influence the vote on all matters submitted to stockholders, including the election of directors and the approval of extraordinary corporate transactions, such as mergers," ExpressJet said in the filing.
Continental will have the right to nominate five directors to ExpressJet's board as long as it owns at least half of ExpressJet's common stock.
CAL owns the stock, which is how Ex-Jet got the $$$ to pay for the jets. Trust me.