The case is centered on a July 2022 bid from a private equity consortium led by Apollo Global Management (Apollo) to acquire Atlas Air, a major air transportation company whose services spanned commercial cargo, passenger charters, and aircraft leasing. The protagonist is facing the difficult task of crafting a recommendation to Atlas Air’s board regarding Apollo’s bid.
Apollo’s courting of Atlas Air had started more than a year before. On June 1, 2021, Apollo’s team had offered $83.50 per share, which at that time had represented a 11.4% premium to Atlas Air’s market share price of $74.93. Since then, Atlas Air had rejected four successive acquisition offers. The last bid of $101 per share, submitted on July 29, 2022, was six dollars below the $107 bid the same syndicate had offered just two month prior on May 19, 2022.
The case allows students to evaluate the value the drivers of a leveraged buyout (LBO) bid. In particular, it offers a nice setting for assessing the impact of changing interest rates, because the interest rate environment has changed dramatically from the first bid submitted by Apollo to the last one. The case also introduces preferred equity as one of the components in an LBO financing stack. It creates fruitful ground for assessing how preferred equity can boost the sponsors’ ability to bid for a company in an LBO.
