Oh, I am SURE this get rich merger scheme will go over well when the Congressional investigation digs up Ichan's connection.
Now, we have an outside matchmaker trying to scare Delta to merge with United. Who exactly is Pardus to tell Delta and United what to do? Pardus has a puny 2.6 and 4.8 percent of stake in each company. Who is Pardus anyway?
Pardus is a hedge fund group. A hedge fund is defined by a CNN online article on understanding financial terms as: A private investment fund that uses high risk techniques such as short selling and derivatives to achieve a higher return. Maligned in some quarters because of the perception that some hedge funds have so much leverage their activities can be detrimental to the global financial system.
In doing a little research about Pardus, read of them being or having been connected to the Lear Corporation. Lear is one of the world's largest suppliers of automotive interior systems and components. More importantly, I saw that the majority stakeholder in the Lear Corporation is none other than a name that strikes revulsion and fear in the hearts of many former and present airline employees. It is none other than that notorious destroyer of airlines in the 1980s, Carl Icahn. If Pardus and Icahn have any connections, look out Delta and United. I have no evidence of this, I just found it interesting that they were both hedge fund movers with investments in a sector with Lear and another auto parts company Visteon.
Icahn is also mentioned in a February 2006 article at Business Week.com. entitled: “Attack Of The Hungry Hedge Funds.†I used to think that hedge funds were helping to prop up ailing American companies, but now… The article reads, “To hike stock prices, they're banding together to force changes on companies. Activist hedge funds had a banner day on Feb. 7. Before the stock market opened, General Motors Corp. (GM ) finally succumbed to months of pressure from billionaire Kirk Kerkorian and his Tracinda Corp. investment fund by slashing its dividend, cutting executive pay, and naming a Kerkorian adviser to the board. In the afternoon, an adviser to billionaire hedge fund manager Carl Icahn issued a 343-page paper detailing how to break up Time Warner Inc. (TWX ) and release about $40 billion in shareholder value. Boosting share prices rather than taking over underperforming companies is the name of the game, and any strategy to achieve that seems fair play…
…In fact, the new strategies mean that such corporate battles are now year-round affairs. At any moment, an activist fund can take a position in a target company and quickly start agitating for change. The first move is often a salty open letter to management. When Icahn, who manages various Icahn Partners funds, wrote to Time Warner shareholders on Oct. 11, he let fly. "Unless this legacy of poor decision-making is fully recognized and the board is held accountable, the dismal record of mistakes and inaction will continue to the detriment of shareholders," he wrote. It was the official opening salvo in the war for the future of the company…†Gee, where have I heard of this scenario in the last couple of days?
So, it is back to the 1980s eh? Cue Gordon Gecko, “Greed is good.†Some speculation is that moves like this are in fear of a Democrat in the White House and a new administration not as amenable to big mergers. So, get while the gettin’ is good, is that it? You just scare investors, management, employees and travelers of airlines into consolidation and pick up a quick buck. Oh, that cry of consolidation. One symptom of a lot of the run away capitalism we have in this world is by those that unless companies merge in an industry that it will all collapse. That and the absurd notion that some have that consolidation of the airline industry would bring more competition. No, it would only bring monopolies. That is not a free market economy.
For now we will just have to believe the statements of Delta and United reported in the New York Times:
“We appreciate receiving Pardus’s views on the best course for Delta’s future,†Mr. Anderson (Delta’s CEO Richard H. Anderson) said in the statement. “We have been consistent in our public statements that Delta believes that the right consolidation transaction could generate significant value for our shareholders and employees.â€
