Merger on Final Approach?
American Airlines and US Airways finally reached a settlement with the U.S. Department of Justice, making their long-awaited merger “all but certain,” the New York Times reports. The DOJ filed an antitrust lawsuit earlier this year to put the deal on hold, arguing that it would harm competition in the industry and lead to higher costs for consumers.
In the settlement, US Airways and Fort Worth–based American agreed to three conditions that the DOJ believes will help curb fare increases, according to the Times. First, the two airlines will sell off 138 runway slots to low-cost carriers at Ronald Reagan National Airport in Washington and La Guardia Airport in New York. The companies will also sell their “rights to a pair of terminal gates and associated ground assets” at five other airports. Finally, they agreed to maintain hubs in New York, Charlotte, Chicago, LA, Miami, Philadelphia and Phoenix for at least three years.
The Bottom Line: Pending approval from American’s bankruptcy judge and the Federal District Court in Washington, the carriers expect to finalize the merger by the end of the year. The new airline will be the largest in the world, offering nearly 7,000 flights per day.
Buffet’s Big Buy-In
The Sage of Omaha is betting big on a comeback for Exxon Mobil. Billionaire investor Warren Buffett’s company Berkshire Hathaway announced this week that it has purchased a $3.45 billion stake in the Irving energy giant. The Wall Street Journal describes the investment as a sign of faith in Exxon’s ability to rebound from more than a year of stagnant share prices and declining oil and gas production.
The company, which has been “spending at historic levels as it tries to boost its output,” is indeed showing signs of life: It just posted stronger third quarter results, notching increases in production and profits over the previous year.
The Bottom Line: Buffett is evidently hoping to break his own streak of bad luck with energy investments in recent years. He bought multibillion-dollar stakes in Texas utility provider Energy Future Holdings and ConocoPhillips in 2007 and 2008, only to suffer major losses when the price of natural gas plummeted shortly thereafter. He later referred to those poorly timed investments as “a big mistake.”
How to Succeed in Fitness
Under Armour has reached a deal to acquire the Austin-based mobile app developer MapMyFitness for $150 million. The athletic apparel retailer is looking to capitalize on the company’s suite of workout-tracking applications, which is among the most popular in the market with about 20 million registered users and 83 million installs since it launched in 2007, TechCrunch reports. Under the terms of the deal, MapMyFitness will keep its headquarters in Austin, retain its existing staff, and continue offering all of its apps.
The Bottom Line: Under Armour has struggled to break into the mobile fitness arena thus far. It does sell a $150 “wearable health tracker and chest strap” called Armour39, which it plans to integrate with MapMyFitness applications.
Winner of the Week: eBay
Online auction magnate eBay Inc. appears to be on its way toward a Texas hiring blitz. The City of Austin is working on a deal with the company that would create at least 400 jobs locally, and about 650 additional engineering positions could be filled statewide within the next few years, according to the Austin Business Journal.
Under Austin’s proposed incentive agreement, the city would back eBay’s application to receive tax rebates under the Texas Enterprise Zone Program. The San Jose, Calif.-based company received similar tax breaks from the city and state back in 2011, when it pledged to hire more than 1,000 workers within ten years.
Loser of the Week: Venezuela
Texas oil and gas companies could begin scaling back their operations in Venezuela in response to a recent series of incidents in which government authorities seized millions of dollars in assets and disrupted projects. The Houston Business Journal spotlighted the issue this week, calling it a “common practice” that often occurs when American firms attempt to collect debts owed by Venezuela’s state-run oil company, Petroleos de Venezuela.
Earlier this month, PDV officials seized two maintenance rigs that had been leased to them by Houston-based Superior Energy Services Inc. In October, the Venezuelan navy detained two ships owned by the Woodlands-based Anadarko Petroleum Corp. And the country’s government is also involved in a long-running legal battle with ConocoPhillips over its seizure of oil operations worth about $30 billion.
An oil and gas attorney quoted in the HBJ story said it might not be long before American energy companies, especially ones with smaller operations in the country, decide to “pull out instead of engage in a protracted legal battle.”