- Aug 21, 2005
- 14
- 0
UAL, Continental Get Serious;
Delta-Northwest Talks Advance
By SUSAN CAREY, DENNIS BERMAN and PAULO PRADA
WSJ
February 6, 2008 5:51 p.m.
Merger discussions between Delta Air Lines Inc. and Northwest Airlines Corp. have picked up steam, and a deal could be announced as early as next week, according to people who have been briefed on the negotiations.
At the same time, preliminary talks between United Airlines parent UAL Corp. and Continental Airlines Inc. have grown more serious, according to a person familiar with the situation.
Key details of either agreement are yet to be hammered out, and the negotiations for either tie up could still fall apart, say people close to the talks. But major snags over how management of the combined Delta-Northwest airline would be structured were overcome earlier this week, those people said, and previously stalled talks have resumed.
Chief among the problems was a disagreement over whether Northwest Chief Executive Officer Doug Steenland and his management team would retain top management roles. However, at a meeting last Friday, the Northwest board overruled Mr. Steenland's concerns and urged him to renew the talks, say people familiar with the situation. Negotiators from both companies went back to work on Monday, those people said.
Nearly a month has passed since directors at Atlanta-based Delta, the third-largest U.S. airline in terms of passenger traffic, gave Chief Executive Officer Richard Anderson the go-ahead to open simultaneous talks with both Northwest and United, with the goal of choosing one or the other as a potential marriage partner. United, based in Chicago, ranks second, and Northwest, in Eagan, Minn., is the fifth biggest carrier. Houston based Continental is the number four carrier. A Delta merger with either Northwest or United would create the largest passenger airline in the world.
Delta's intent was to pursue tandem negotiations with Northwest and United on a compressed timeline, get a deal inked by mid-February at the latest and quickly begin the process for winning antitrust approval. Executives at the airlines believe any mergers in the industry are more likely to pass regulatory muster during the waning days of the Bush administration than under a new president next year.
As of Wednesday, a Delta-Northwest match still wasn't a done deal. There is always the chance that Mr. Anderson will tell his board he thinks Delta should remain independent. That was the position taken by the Atlanta carrier's previous CEO, Jerry Grinstein, when the company was repelling a hostile takeover attempt by US Airways Group Inc. last year. There also is a possibility that Delta still could veer towards a United tie-up, and the two have continued exploratory talks over the past month, say multiple people briefed on the matter.
United is instead focusing on discussions with Continental, said one person familiar with the situation. If a deal between the two does come together, the hope would be to do it very near a Northwest-Delta announcement, so the two potential combinations would undergo regulatory scrutiny at the same time, this person added. Another person with knowledge of the situation said United and Continental are poised to act quickly once another airline merger is announced.
If Delta and Northwest sign a letter of intent in the coming days, that would trigger another development that could hasten further attempts to consolidate. Northwest currently has a "golden share" of preferred stock in Continental that allows Northwest to block a merger of Continental with another large carrier. But if Northwest agrees to merge with Delta – even if the deal is never consummated -- Continental could redeem that stock for a total of just $100.
That would free Houston-based Continental to pursue its own merger or to more enthusiastically entertain the attentions of United, which already has pitched a combination with Continental and been rebuffed, or yet another carrier. Continental executives have repeatedly said they prefer to remain independent, but would do what is best for the company if the competitive landscape changes.
A Delta spokeswoman said her company won't provide updates on its board's review of consolidation opportunities. A Northwest spokeswoman declined to comment. Continental declined to comment. United didn't immediately respond to a request for comment on the talks.
Write to Susan Carey at [email protected] and Dennis Berman at [email protected]
Delta-Northwest Talks Advance
By SUSAN CAREY, DENNIS BERMAN and PAULO PRADA
WSJ
February 6, 2008 5:51 p.m.
Merger discussions between Delta Air Lines Inc. and Northwest Airlines Corp. have picked up steam, and a deal could be announced as early as next week, according to people who have been briefed on the negotiations.
At the same time, preliminary talks between United Airlines parent UAL Corp. and Continental Airlines Inc. have grown more serious, according to a person familiar with the situation.
Key details of either agreement are yet to be hammered out, and the negotiations for either tie up could still fall apart, say people close to the talks. But major snags over how management of the combined Delta-Northwest airline would be structured were overcome earlier this week, those people said, and previously stalled talks have resumed.
Chief among the problems was a disagreement over whether Northwest Chief Executive Officer Doug Steenland and his management team would retain top management roles. However, at a meeting last Friday, the Northwest board overruled Mr. Steenland's concerns and urged him to renew the talks, say people familiar with the situation. Negotiators from both companies went back to work on Monday, those people said.
Nearly a month has passed since directors at Atlanta-based Delta, the third-largest U.S. airline in terms of passenger traffic, gave Chief Executive Officer Richard Anderson the go-ahead to open simultaneous talks with both Northwest and United, with the goal of choosing one or the other as a potential marriage partner. United, based in Chicago, ranks second, and Northwest, in Eagan, Minn., is the fifth biggest carrier. Houston based Continental is the number four carrier. A Delta merger with either Northwest or United would create the largest passenger airline in the world.
Delta's intent was to pursue tandem negotiations with Northwest and United on a compressed timeline, get a deal inked by mid-February at the latest and quickly begin the process for winning antitrust approval. Executives at the airlines believe any mergers in the industry are more likely to pass regulatory muster during the waning days of the Bush administration than under a new president next year.
As of Wednesday, a Delta-Northwest match still wasn't a done deal. There is always the chance that Mr. Anderson will tell his board he thinks Delta should remain independent. That was the position taken by the Atlanta carrier's previous CEO, Jerry Grinstein, when the company was repelling a hostile takeover attempt by US Airways Group Inc. last year. There also is a possibility that Delta still could veer towards a United tie-up, and the two have continued exploratory talks over the past month, say multiple people briefed on the matter.
United is instead focusing on discussions with Continental, said one person familiar with the situation. If a deal between the two does come together, the hope would be to do it very near a Northwest-Delta announcement, so the two potential combinations would undergo regulatory scrutiny at the same time, this person added. Another person with knowledge of the situation said United and Continental are poised to act quickly once another airline merger is announced.
If Delta and Northwest sign a letter of intent in the coming days, that would trigger another development that could hasten further attempts to consolidate. Northwest currently has a "golden share" of preferred stock in Continental that allows Northwest to block a merger of Continental with another large carrier. But if Northwest agrees to merge with Delta – even if the deal is never consummated -- Continental could redeem that stock for a total of just $100.
That would free Houston-based Continental to pursue its own merger or to more enthusiastically entertain the attentions of United, which already has pitched a combination with Continental and been rebuffed, or yet another carrier. Continental executives have repeatedly said they prefer to remain independent, but would do what is best for the company if the competitive landscape changes.
A Delta spokeswoman said her company won't provide updates on its board's review of consolidation opportunities. A Northwest spokeswoman declined to comment. Continental declined to comment. United didn't immediately respond to a request for comment on the talks.
Write to Susan Carey at [email protected] and Dennis Berman at [email protected]
