Northwest, Delta Discuss Tie-Up
By SUSAN CAREY, MELANIE TROTTMAN AND EVAN PEREZ
January 10, 2007 2:17 p.m.
Northwest Airlines has been having recurring talks with
Delta Air Lines about a potential link-up between the two,
possibly after they both emerge from bankruptcy-court
protection later this year, said people familiar with the
matter.
Meetings between executives at various levels of management
and between the airlines' advisers have been occurring
regularly for weeks, including some in recent days. These
sessions have helped Delta's creditors come to see a
combination with Northwest as a realistic alternative to US
Airways Group Inc.'s hostile takeover bid.
US Airways today upped the ante by sweetening its hostile
takeover bid for Delta to $10 billion. US Airways improved
its mid-November $8.4 billion bid after Gordon Bethune, a
former airline executive hired as an adviser by the Delta
creditors, on Monday told US Airways its first offer wasn't
good enough, said one person familiar with the matter.
Delta, which has insisted that it wants to step out of
Chapter 11 as an independent airline, was trying to persuade
its creditors that its standalone post-bankruptcy business
plan is superior to US Airways' first offer. The Delta
creditors, who met today, are taking the improved offer
seriously and intend to pressure Delta to consider opening
its books to due diligence by US Airways and possibly other
suitors, this person said.
Meantime Northwest has emerged as a "promising third option"
to Delta's standalone plan and US Airways' sweetened bid,
said one person familiar with the matter. Another person
with knowledge of the matter said there also have been
contacts by UAL Corp.'s United Airlines with Delta. But this
individual said it's not clear whether Delta has officially
investigated an alternative deal with either Northwest or
United.
Another individual said the United-Delta conversations
haven't been as frequent or recent as the ongoing Northwest-
Delta contacts. United has been having exploratory talks
about a combination with Continental Airlines Inc., its
preferred dance partner, although many issues remain to be
sorted out, according to another person familiar with that
situation. Continental isn't certain it wants to combine
with any rival, but is going along with negotiations out of
concern that any Delta deal with lead to a flurry of
mergers.
Northwest, which also wants to step out of court protection
as an independent company, is expected in the next few days
to file its preliminary plan of reorganization with the U.S.
Bankruptcy Court in New York. It must file that document by
Tuesday as that is the day its right to field such a plan
without facing rival plans from creditors or other parties
expires. Leading up to that, Northwest has been out in the
marketplace trying to raise equity capital to help fund the
company once it leaves Chapter 11.
Northwest, which had been virtually mum about the merger
speculation sweeping the industry, last month broke its
silence by hiring investment-banking and restructuring
advisers Evercore Partners Inc. to help it evaluate and
possibly implement a merger, acquisition or other business
combination. But as early as last May, the Northwest board
of directors created a special committee to evaluate
consolidation possibilities.
Write to Susan Carey at
[email protected] and Melanie
Trottman at
[email protected]