AMR to Unveil Plans to Spin Off Sabre ---- Computer-Services Concern To Bring $6.2 Billion; Hannigan Named CEO
American Airlines parent AMR Corp. is expected to unveil plans for a $6.2 billion spinoff of its Sabre Holdings Corp. today and announce the hiring of a telecommunications executive to head the newly independent computer-services company, people familiar with the moves said.</br></br>The spinoff, long sought by Wall Street, will split AMR in half and free Sabre to wheel and deal in the rapidly changing world of technology outsourcing and Internet-based travel sales. What is more, analysts and AMR executives have argued that neither the full value of American Airlines, the nation's second-largest airline, nor Sabre was reflected in the share price of AMR. "When people do the math, it's clear the market has not fully valued the airline," one person familiar with the transaction said. "AMR has taken Sabre as far as it can, and it has realized as much value for AMR shareholders as it knows how to do."</br></br>About 17% of Sabre is publicly traded. AMR plans to spin off its 83% stake to AMR shareholders in March, subject to Internal Revenue Service approval as a tax-free transaction. AMR applied for IRS approval in the fall. AMR shareholders will receive 0.7 share of Sabre stock, valued at about $36 at yesterday's closing price, for each AMR share owned, people involved said.</br></br>Sabre shareholders, including AMR, will receive a one-time dividend of about $5.50 a share, or a total of $675 million, prior to the spinoff. People involved said the payment is intended to repay AMR for the cash balance built at Sabre during AMR's ownership.</br></br>AMR, which has worked to ward off possible debt-rating downgrades as it sheds more than half of its market value, will use the cash to bolster its balance sheet. Sabre, on the other hand, will borrow about $350 million for the dividend, damping earnings next year, because of increased interest expense on top of about $10 million transaction fees for the spinoff, people familiar with the terms said.