Merger talk flies around Delta

Like a wild day on Wall Street, the fate of one of Atlanta's biggest employers appeared to change by the minute Wednesday. Fueled by news of a letter from a hedge fund, Delta Air Lines went from potential acquirer of one of its biggest rivals...


Like a wild day on Wall Street, the fate of one of Atlanta's biggest employers appeared to change by the minute Wednesday.

Fueled by news of a letter from a hedge fund, Delta Air Lines went from potential acquirer of one of its biggest rivals, United Airlines, early in the day to possibly being absorbed by the Chicago-based company.

By the close of the stock market, both United and Delta officials were denying that any merger talks were taking place --- and politicians and economic development officials in both cities were trying to figure out whether they will have to prepare for an all-out campaign to keep the hometown airline.

Still, a few things are certain:

* New York-based Pardus Capital Management, like many on Wall Street, wants Delta to merge with another carrier --- preferably United --- to improve its financial prospects in a chronically turbulent industry.

* Delta and United also want to see consolidation.

* All say such giant mergers are fraught with risks --- from mismatched fleets and computers to potentially hostile employees, politicians and regulators --- that reduce the odds of their becoming reality.

The merger speculation started when it was disclosed that Pardus had written Delta, urging the carrier to negotiate a stock-for-stock merger with United. The New York firm, which owns 7 million Delta shares (2.6 percent) and 5.6 million United shares (4.8 percent), said it would also support Delta CEO Richard Anderson as the head of the combined company, the New York Times reported in its online story.

Delta executives, while saying no talks were in progress, initially said they "appreciate receiving Pardus' views." Delta also said it had hired financial and legal advisors and created a subcommittee of its board of directors to look at "strategic alternatives" --- often code words for plans to begin talks to buy or sell a company. Delta said it took those measures before getting Pardus' proposal.

Later Wednesday, however, Delta tried to tamp down the merger speculation after some news outlets reported that the two airlines were rushing merger talks to create a Chicago-based carrier that would be called United, in time for the Bush administration to complete an antitrust review before it leaves the White House in early 2009.

"Somebody's making that up. That's just flat-out untrue," Delta President Ed Bastian said in a second interview Wednesday after merger speculation swept through the financial news media. "There's absolutely no discussions going on, either formal or informal, with any carrier."

Other than informal talks Delta had early this year with Northwest Airlines, Bastian denied that the Atlanta-based carrier is now or has been in merger talks with United. Still, he said Delta is open to the "right deal" to take over another carrier.

United also denied the reports, but indicated that it, too, thinks mergers are inevitable.

"We do not respond to wholly inaccurate statements made by people who claim to have knowledge when they clearly do not," said United spokeswoman Jean Medina in an e-mail.

"We have said for the last four years that we believe consolidation is necessary for the industry, and others independently are reaching the same conclusion," she said. "We make decisions in the best interest of United, and we don't comment on the opinion of one shareholder, or the actions or hypothetical transactions proposed by others."

U.S. Sen. Johnny Isakson (R-Ga.) said Wednesday he was personally given assurances by Delta's Anderson that he would only back a merger if "Delta is the survivor" and the carrier continued to be based in Atlanta.

Isakson, a leading voice on aviation during his time at the Georgia General Assembly, the U.S. House of Representatives and now in the U.S. Senate, said he invited Anderson to his office Wednesday to discuss rumors that Delta and United were in merger talks.

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