C010T3
Topic Author
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Why Don't NW Sell CO's Golden Shares?

Fri Nov 17, 2006 11:15 am

I was wondering why NW don't sell their golden shares in CO. They need the cash and I'm sure that there would be many buyers interested. It would be a start for a UA/CO deal for example.
 
lincoln
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RE: Why Don't NW Sell CO's Golden Shares?

Fri Nov 17, 2006 11:46 am

Quoting C010T3 (Thread starter):
I was wondering why NW don't sell their golden shares in CO. They need the cash and I'm sure that there would be many buyers interested. It would be a start for a UA/CO deal for example.

I could very well be wrong, but I don't beleive the so-called "golden share" (there's only one) can be transfered; even if it could be I have doubts about how valuable it is (IIRC, it has no intrinsic voting rights of its own and doesn't represent a significant ownership interest -- just the ability to veto a merger/acquisition).

Lincoln
CO Is My Airline of Choice || Baggage Claim is an airline's last chance to disappoint a customer || Next flts in profile
 
sllevin
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RE: Why Don't NW Sell CO's Golden Shares?

Fri Nov 17, 2006 12:02 pm

Part of the short reason is that NW really needs CO to remain a significant airline. I'm speaking from a route stanpoint, of course.

For example, living out here on the west coast, being able to chose NW *or* CO and receive essentially the same benefits and treatment lets me seamlessly travel across the combined network. Admittedly, if you are an NW customer, there's still some significant incentive (which has gotten higher in recent times) to fly NW metal where possible, but once can still very effectively leverage the value of CO's network as well.

Losing CO as a partner would be a double whammy -- the CO+partner would represent a stronger competitor that CO and a standalone other airline are now, *and* NW would be weakened at the same time. So NW isn't going to be quick to approve anything that hurts them and helps a competitor at the same time.

Steve
 
FlyHoss
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RE: Why Don't NW Sell CO's Golden Shares?

Fri Nov 17, 2006 12:26 pm

Quoting Lincoln (Reply 1):
I could very well be wrong, but I don't beleive the so-called "golden share" (there's only one) can be transfered; even if it could be I have doubts about how valuable it is (IIRC, it has no intrinsic voting rights of its own and doesn't represent a significant ownership interest -- just the ability to veto a merger/acquisition).



Quoting Sllevin (Reply 2):
Part of the short reason is that NW really needs CO to remain a significant airline. I'm speaking from a route stanpoint, of course.

Losing CO as a partner would be a double whammy -- the CO+partner would represent a stronger competitor that CO and a standalone other airline are now, *and* NW would be weakened at the same time. So NW isn't going to be quick to approve anything that hurts them and helps a competitor at the same time.

Impressive, well thought answers from the both of you. Bravo, well done. A tip of my cap to you, Lincoln and Sllevin.
A little bit louder now, a lil bit louder now...
 
baw716
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RE: Why Don't NW Sell CO's Golden Shares?

Fri Nov 17, 2006 3:27 pm

NW holding that chip on CO keeps the SkyTeam alliance intact; especially given the fact that DL has no intention of doing a deal with US. NW is a much stronger carrier with CO as a competitor and a code share partner. The revenue share from the code share alone is worth millions of $$.

NW won't give up something that valuable.

baw716
David L. Lamb, fmr Area Mgr Alitalia SFO 1998-2002, fmr Regional Analyst SFO-UAL 1992-1998
 
Lemurs
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RE: Why Don't NW Sell CO's Golden Shares?

Fri Nov 17, 2006 3:56 pm

Lincoln has it right. If you read CO's financial statements, it is very clear about the limitations of the golden share. It only exists as long as NW exists and can't be transfered. It has no voting rights, and doesn't represent anything tangible or asset based at all. If NW folds, the share goes out of existance. It is essentially only useful as a veto over other airlines aquiring CO, and only for NW.

Some very creative financial types created the single share for NW there, because it is very specific, and very limited.
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