What is a hedge fund company who owns 7 million Delta shares and 5.6 million United Shares doing ?

They sent a letter to the Delta Board saying "Look at mergers." Delta didn't originate the speculation; the hedge fund did.

Do you think the hedge fund company is enjoying Delta's stock going up with the speculation?

I would look for a United Delta merge

PS This is a Nov, 2007 article. Is is still valid ?



"When Anderson was named in August as Delta CEO to replace Grinstein, there was immediate speculation in the investment community that Delta and Northwest might eventually merge. Anderson is a former CEO of Northwest Airlines Corp.

Anderson immediately tried to dispel such speculation, telling Delta employees he wasn't coming to Delta to facilitate a deal with Eagan, Minn.-based Northwest.

Delta's initial statement Wednesday about the establishment of a board committee followed the release of a letter by a hedge fund that owns 7 million Delta shares that called on the airline to consider combining with UAL.

Pardus Capital Management LP said in the letter to Delta's top management that it is "imperative" that the company undertake a merger transaction with another airline in view of soaring fuel prices and what it described as the increased risks of going it alone.
"Consolidation is needed to de-risk the industry and time is of the essence as now is the right regulatory environment," said Karim Samii, president of Pardus, and Shane Larson, a principal.

The hedge fund executives said they had determined since making a similar recommendation in a Sept. 7 letter that "the most attractive and practical combination would be a Delta and United Airlines combination."

It cited figures from a consulting firm estimating that the benefits of such a pairing would be about $585 million and said a combined Delta-United would boast a broader network than any other combination.
Pardus also owned 5.6 million shares of Chicago-based UAL as of Sept. 30.

Pardus executives said a Delta combination with Northwest would produce even bigger benefits of about $1.5 billion, primarily from combining the smallest hubs - Detroit/Cincinnati and Memphis/Atlanta.
"However, Northwest may not enable Delta to complete the breadth of network that business travelers require, resulting in the need for a potential follow-on transaction at a later date in order to achieve the same breadth of network that UAL would provide out of the box."
Pardus, citing information provided by the air transport consultancy Simat, Helliesen & Eichner Inc., said a third potential combination, with Continental Airlines Inc., would produce no synergies and would raise other challenges.

Robert Mann, an airline consultant in Port Washington, N.Y., said United's broad Pacific network and Delta's huge Atlantic presence would complement each other. However, he said, combining fleet information systems and labor could pose challenges. The biggest problem would be that neither carrier has any recent track record of integration, he said. "I would see this as a very risky move from the standpoint of the actual implementation," Mann said.