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Banks (Finance)

Northwest Airlines Prepares for Merger Game with Investment Banking Firm

Strategic Insights

— 2 min read

Northwest Airlines, already a player in the financial restructuring of the company, has taken a significant step forward by hiring Evercore Group as a strategic adviser on possible deals. This move comes on the heels of a hostile takeover bid by US Airways for Delta Air Lines, which many industry observers see as the opening move in a chess match that could involve most of the largest U.S. carriers. With Northwest's management opting not to elaborate on their intentions, industry analysts are speculating about the carrier's future and its potential role in the merger landscape.

Key Takeaways:

  • Northwest Airlines has hired Evercore Group as a strategic adviser on possible deals, signaling their readiness to explore merger opportunities.
  • The decision comes as US Airways launched a hostile takeover bid for Delta Air Lines, setting off a chain reaction of industry speculation about future mergers and acquisitions.
  • Industry analysts believe Northwest's hiring of Evercore will allow the carrier to be prepared for any scenario, including fending off an unwanted offer from a rival.
  • Northwest Chairman Gary Wilson, CEO Doug Steenland, and Chief Financial Officer Neal Cohen have not granted interview requests, leaving the industry guessing about their intentions.
  • The carrier's stock price has risen 48% following the news of US Air's bid for Delta, indicating that investors are betting on Northwest being involved in a deal.
  • Northwest's stock has climbed steadily since the news of US Air's bid for Delta in mid-November, with the carrier's shares now trading at $4.90 per share.
  • The carrier's management believes the current prices at which its stock is trading now justify a buyer emerging for Northwest to justify the current prices.

Statistics:

  • Northwest's stock price has risen 48% following the news of US Air's bid for Delta.
  • The carrier's stock has climbed steadily since the news of US Air's bid for Delta in mid-November.
  • Northwest's current stock price is at $4.90 per share.
  • The carrier's bonds due to mature in March 2008 closed Friday at 84.12 cents for every dollar in face value.
  • The same bonds fetched just 43 cents on the dollar in May 2006.
  • Northwest's stock price has climbed from less than 50 cents a share in September to its current price of $4.90.

Sources:

  • Liz Fedor - Northwest Airlines Prepares for Merger Game - 612-673-7709.
  • Benchmark Co. - Airline analyst Helane Becker.
  • Evercore Group - Chairman Roger Altman.
  • Goldman Sachs - Retained by United Airlines.
  • Standard & Poor's - Analyst Phil Baggaley.
  • University of Minnesota - Associate Professor of Finance Rajesh Aggarwal.

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