Originally Posted by
jdt30
We can merge or buy, the problem is we have to pay a large amount of money for that golden share. Cal would be a lot better off if the mergers did not happen and we were allowed to grow on our own at our own pace. The problem is that right now we are not large enough to compete against a combined DAL/NWA.
From what I've been reading in the USA Today, New York Times, Financial Week, and Yahoo finance CAL can't merge regardless of how much money it has. The only way CAL can merge is if NWA allows it, or merges itself. Acutally NWA doesn't even have to merge they simply have to start a merger. If the merger fails CAL is still free to do what it wants.
CAL could go to NWA with a pile of money and try to buy that ticket from them, but if NWA says no there's nothing they can do. This has been a common practice in corps. and goverments since the 1980s. It's effective and can't be circumvented. That one share, the golden share, has the authority to overide all the other shares. If the shareholders want to merge, and NWA says no, that one share makes their voice official.
Typically, the nominal shares grant the owners the right to outvote all other shares in specified circumstances. In Northwest’s case, its golden share enabled the company to block Continental from merging with another airline.
If Northwest enters into a merger agreement before Continental, however, Continental is entitled to redeem the golden share for $100. That’s true, even if an announced Northwest merger does not ultimately take place.
Calyon Securities analyst Raymond Neidl, however, believes that Northwest will be the first to move. “We anticipate the process will be led off by Delta and Northwest proposing a combination,” he said.
In that case, Continental would be free to hook up with another airline. Mr. Neidl predicts that the carrier will attempt to partner with United Airlines.