UPDATE 3-Continental, UAL agree on exchange ratio-source

* Ratio is 1.05 UAL share for each Continental share

* UAL board meets Friday, CAL board meets Friday, Sunday
(Updates with closing stock prices)

By Jui Chakravorty

NEW YORK, April 30 (BestGrowthStock) – Continental Airlines Inc
(CAL.N: ) and UAL Corp’s (UAUA.O: ) United Airlines have ironed out
the last remaining wrinkle in their merger talks, paving the
way for a deal that would create the world’s largest carrier,
two sources familiar with the matter said on Friday.

The airlines have agreed to an exchange ratio of 1.05 UAL
shares for each Continental share in all-stock deal yet to be
approved by the companies’ boards, the sources said.

Based on United’s stock price of $21.83 on Friday
afternoon, and Continental’s 139.6 million outstanding shares
as of April 21, United would pay $3.2 billion for Continental.

That value would be determined by the market, and could
change quite a bit by the time the deal closed and the shares
were exchanged.

Based on current shares outstanding, a combined company
would have 314.5 million shares, and UAL shareholders would own
roughly 53 percent of the new company.

United’s board will meet on Friday, while Continental’s
board will hold meetings on Friday and Sunday to discuss the
deal, the sources said.

Under the terms being discussed for the all-stock merger,
UAL Chief Executive Glenn Tilton would become non-executive
chairman of the combined carrier while Continental CEO Jeff
Smisek would become chief executive.

The combined carrier would operate under the United brand
name and would be based in Chicago, sources had previously told
Reuters.

United and Continental declined comment.

UAL shares closed at $21.60, up 0.6 percent on Friday while
Continental shares closed at $22.35, down 1.5 percent.

The two airlines restarted merger talks in April, two years
after walking away from almost sealing a deal. Continental’s
board voted down a similar plan two years ago, but industry
experts have said an approval is more likely this year because
UAL is in better financial shape.

UAL posted a narrower first-quarter loss of $82 million,
compared with a year-earlier loss of $382 million. Revenue rose
15 percent to $4.2 billion.

Many airline executives have called for consolidation,
saying it is a necessity to allow the industry to return to
profitability.

Airlines, struggling with high fuel prices and a pullback
in consumer spending amid a weak economy, have lost $50 billion
in the past 10 years, according to the International Air
Transport Association.

The industry lost $11 billion in 2009 alone.

Still, Continental has long said it would prefer to remain
independent. But at a conference in March, CEO Smisek said the
company would “bulk up defensively” if it would be in its best
interest.

Stock Research

(Additional reporting by Kyle Peterson, editing by Gerald E.
McCormick, Phil Berlowitz and Carol Bishopric)

UPDATE 3-Continental, UAL agree on exchange ratio-source