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Airborne mulling sale of ground operations to DHL

| Tuesday, March 25, 2003

SEATTLE -- Airborne Inc. said Monday it is negotiating to sell its ground operations to DHL Worldwide Express for cash at a premium over the express mail company's current stock price.

With more than 48.4 million shares outstanding, Airborne was worth more than $800 million at Friday's closing stock price. The Wall Street Journal, which reported on the talks in yesterday's edition, said the companies were close to an agreement for slightly more than $1 billion.

Airborne shares climbed $1.36, or 8.2 percent, to close yesterday at $18.05 on the New York Stock Exchange.

In its news release yesterday, Airborne said its air operations would remain wholly owned by current shareholders should a deal be reached and completed.

But it cautioned that no agreement had been reached yet and there was no assurance one would be reached. Any agreement would be subject to regulatory approval and stockholder ratification.

Airborne said it will not make further announcements about the talks until a deal is concluded or efforts to reach one are abandoned. An Airborne spokesman did not return calls yesterday.

The announcement was issued before yesterday's market opening. Airborne stock gained 87 cents Friday to close at $16.69 a share. Its high over the past 52 weeks was $23.34.

The Journal's story yesterday said that under the terms being discussed, DHL would pay in the low $20s per share.

Airborne began offering ground service, a less expensive alternative to air shipments, on April 20, 2001, to compete with two larger rivals, Federal Express and United Parcel Service. Both are likely to strenuously oppose approval of any deal with DHL, The Journal reported.

Ground operations accounted for 11 percent of the company's total volume of shipments last year, said Jamelah Leddy, with Seattle-based McAdams Wright Ragen.

"At this point it is not clear to us if DHL would purchase (Airborne's) ground operations or purchase the entire company and then spin off the air operations, Leddy wrote in a report. She said the price tag of nearly $1 billion "seems like an unusually large premium."

DHL, an express delivery service, is owned by Deutsche Post of Berlin, which in turn is owned 69 percent by the German government.

Airborne Inc. is the holding company for Airborne Express, which provides shipment of letters, small packages and fright throughout the United states and more than 200 countries.

In the quarter ending Dec. 31, Airborne reported earnings of 25 cents a share on $896.8 million in revenue, compared with 5 cents a share in profit on $804.5 million in revenue a year earlier.

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