Why Would AMR Be Acquired Now?

(AMR) AMR, the parent of American Airlines, has its shares up as much as 9% pre-market after Business Week noted it could be acquired in their "Inside Wall Street" for $46 to $52 by a Goldman Sachs and British Air team.  Reuters reports this morning that British Air and Goldman Sachs are not currently planning to bid.  At least BW did say it was uncertain that a bid would materialize.

Someone is right and someone is wrong.  My guess is that Reuters is the correct party here.  The problem with AIRLINE buyouts is that these often get hosed for more reasons than other operating companies.  Airlines have a history of big UPS and bad DOWNS.  It is sort of like having a trust fund baby with ADD that is also addicted to Gambling: Sometimes there is going to be a lot more money than could have been imagined and sometimes the fortune evaporates right before your eyes.  Goldman has raised significant private equity funds, but that doesn’t mean they would focus here; there are also many hurdles to foreign owners holding more than 25% of an American legacy airline carrier.

Business Week has smart people working for it, but their rumors and speculated takeout names tend to not have instant validity.  Their stories are also usually from the financial side and AMR is up 30+-fold from the post 9/11 lows.  So if you were going to acquire AMR why would you do it NOW?  Is AMR part of our BAIT SHOP of buyout candidates?  No way, and it isn’t even on the watch list.

Jon C. Ogg
February 16, 2007