Delta panel to look into merger
Delta Air Lines said it has formed a special board committee to explore the possibility of merging with another airline to ensure the nation's No. 3 carrier ""maintains its leadership position" in the industry.
Delta's disclosure about the new committee followed reports that a hedge fund with stakes in both Delta and No. 2 United Airlines is urging the carriers to merge.
In a Tuesday letter to senior Delta officials, Pardus Capital Management said a Delta-United merger would produce the strongest and most valuable merged carrier. A Delta merger with Northwest would also add value, the letter said.
Officials at Pardus, a 2-year-old hedge fund based in New York, declined to comment on the letter. The fund owns 7 million Delta shares, a 2.4 percent stake. It owns 5.6 million United shares, a 4.8 percent stake.
The letter was reported Wednesday by The Wall Street Journal online and The Associated Press. Those online reports sparked huge midafternoon gains in both airlines' share prices. But United closed at $44.17, up just 1.5 percent. The Delta price slipped back from midafternoon trading and closed at $19.52, up 4.1 percent. The AP, citing unnamed sources, reported that merger talks are under way.
But in statements Wednesday, Atlanta-based Delta and Chicago-based United said no active merger talks are underway. Delta CEO Richard Anderson and United CEO Glenn Tilton have publicly advocated industry consolidation to ensure the long-term health of U.S. airlines.
Delta emerged from Chapter 11 bankruptcy-court protection in April after fending off a hostile takeover attempt by Phoenix-based US Airways. Anderson, who took over as Delta's CEO in September, succeeded former CEO Jerry Grinstein, who led the airline through Chapter 11 reorganization. United emerged from Chapter 11 in 2006.
"We have been consistent ... that Delta believes the right consolidation transaction could generate significant value for our shareholders and employees," Anderson said in a statement. "With oil at over $90 a barrel, this analysis takes on a heightened importance."
Delta said its new board committee is headed by Daniel Carp, the airline's non-executive chairman. Delta said it has hired financial and legal advisers to help the committee develop recommendations for the board.
United spokeswoman Jean Medina said Tilton has maintained for four years that "consolidation is necessary for the industry. Others are independently reaching the same conclusion." She said United would not comment "on the opinion of one shareholder."
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