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Northwest And American Merging!

Sat Jun 03, 2000 5:55 am

I was just watching TV and the "Market Watch" said that American and Northwest are talking about merging! Has anyone else heard about this? I would have never guessed!
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RE: Northwest And American Merging!

Sat Jun 03, 2000 6:10 am

I just read a post that said "merge merge merge merge" and I just want to clear this up... this is not something that I think may be a good idea... I saw this on TV.
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RE: Northwest And American Merging!

Sat Jun 03, 2000 6:54 am

I heard the same thing on local TV here in Motown. Some rumors were coming out of MSP. NW wouldn't comment.

RE: Northwest And American Merging!

Sat Jun 03, 2000 7:06 am

Bad news at least from the livery standpoint. Both belong to my favourite´s.
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RE: Northwest And American Merging!

Sat Jun 03, 2000 7:15 am

This would explain KLM dropping AZ and BA's interest in KLM
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RE: Northwest And American Merging!

Sat Jun 03, 2000 7:36 am

I heard that on NBC "Today"(my mom had it on) but it is not official even though I have a feeling it will be in a couple of days matter.
Give me a break, I created this username when I was a kid...
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RE: Northwest And American Merging!

Sat Jun 03, 2000 7:48 am

Northwest shares surge on American talks report

By Brad Dorfman

CHICAGO, June 2 (Reuters) - Shares of Northwest Airlines Corp. jumped as much as 25 percent on Friday on a television report that the No. 4 U.S. airline has been in talks to be acquired by AMR Corp. , parent of the world's second-largest airline.

Such a merger would track the $4.3 billion acquisition of US Airways Group Inc. , the No. 6 U.S. airline, announced last week by UAL Corp. , parent of the world's largest carrier, United Airlines.

The deal, if finalized, would face the same tough regulatory hurdles clouding completion of the UAL-U.S. Airways deal, and could even cause regulators to veto both deals.

"Each deal that is announced ... reduces the probability of any deals happening," Samuel Buttrick, airline industry analyst at PaineWebber said in a research note, in which he lowered his rating on Northwest to "attractive" from "buy."

St. Paul, Minn.-based KSTP-TV, citing "well-placed sources," reported Thursday that AMR chief executive Don Carty and Northwest president and Chief Executive John Dasburg have spoken about a possible merger.

Shares of St. Paul-based Northwest were up 5-12/16 at 34-13/16 Friday afternoon, after trading as high as 36-3/8 earlier in the day, their highest level in almost two years. AMR shares were down 1-8/16 at 27-15/16, above the 52-week low of 26-10/16 and well below the 52-week high of 73.

A Northwest-American combination would help American keep up with United in size and would shore up American's weak Asia presence while boosting Northwest in Latin America.

But analysts cautioned that even if the two sides were to reach an agreement, the chances of a deal receiving the necessary regulatory approvals could be only about 50 percent.

AMR declined comment on the talks report.

"We do not comment on any rumors nor confirm or deny them," spokesman Chris Chiames said. Northwest spokesman Jon Austin also declined comment on the report.

The pilots union at American said company officials did not mention a possible bid for Northwest or any other possible deals during a meeting with the union's board of directors Thursday.

"Other than a simple acknowledgment that if the United-US Airways deal is actually consummated, it would have a major impact on American's network, there was no other mention of the issue," Greg Overman, a spokesman for the Allied Pilots Association, said.

The Air Line Pilots Association, which represents Northwest's pilots, declined to comment specifically on the American report.

"As media coverage of the proposed United Airlines/US Airways merger continues, we assume that meetings and discussions may occur among the remaining airlines, in every possible combination," Mark McClain, chairman of the Northwest pilots master executive council, said in a statement.

Airline industry analysts and employees had expected AMR to explore a possible bid with Northwest after UAL announced its plan to buy US Airways. They also expected No. 3 U.S. carrier Delta Air Lines Inc. to consider an acquisition.

There is "a high probability that they're in talks," Raymond Neidl, airline analyst at ING Barings, said of Northwest and AMR.

But Neidl said the deal would only have about a 50 percent chance of happening and PaineWebber's Buttrick put the chances of such a bid being successfully completed at 40-50 percent.

The deal would require approval by the U.S. Department of Justice, which would take a close look at the effect of the consolidation on the U.S airline market. A Northwest deal could be more difficult than the UAL merger because it owns a majority stake in Houston-based Continental Airlines Inc. .

Opposition from powerful airline unions could also make a deal more difficult to complete.

James Higgins, an airline industry analyst at Donaldson, Lufkin & Jenrette, said he thought it was likely a deal to combine American and Northwest would be announced, but he was not sure such a deal would be completed.

He said it was difficult to put a value on Northwest. If Northwest was valued at a multiple of earnings before interest, taxes, depreciation and amortization, Northwest could actually be worth less than what it is now trading at.

But if a deal was based on a multiple of Northwest's peak earnings, it could be worth somewhere in the low $50-share range, he said.

16:09 06-02-00
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Another Story...more Proof

Sat Jun 03, 2000 7:50 am

St. Paul, Minnesota, June 2 (Bloomberg) -- Northwest Airlines Corp. shares rose 22 percent after a Minnesota television station reported that the carrier is in talks to be bought by AMR Corp., parent of American Airlines.

Northwest climbed 6 3/8 to 35 7/16, its biggest one-day gain since at least 1980. KSTP TV in St. Paul, citing unnamed sources, said AMR Chairman Don Carty and Northwest Chief Executive John Dasburg discussed a transaction. The airlines declined to comment on the report, which said talks are in ``early stages.''

UAL Corp. last week unveiled a plan to buy US Airways Group Inc. for $11.6 billion, creating an airline with almost 7,000 daily flights spanning the U.S. and with a broader reach in Europe. American Airlines, the second-largest carrier after UAL's United, is seeking more routes and passengers to compete with its proposed new rival, analysts said.

``It's a defensive move in case United and US Airways get regulatory approval,'' said Doug McVitie, managing director of Arran Aerospace, a consulting company in Scotland.

The UAL and US Airways transaction may receive added U.S. Justice Department scrutiny because of a potential acquisition involving rival American Airlines, analysts said.

A purchase of Northwest, the fourth-largest U.S. airline, would ``lead to a more concentrated industry nationally -- something the antitrust division will be very concerned about,'' said Washington antitrust lawyer Robert Burka, who formerly worked for the Federal Trade Commission.

Northwest stock, which has gained 3 percent in the last 12 months, touched 36 3/8 earlier in the day. AMR shares, which fell 1 1/8 to 28 5/16, have declined 4.4 percent in the last 12 months. UAL climbed 15/16 to 54 1/16, and its stock has slipped 18 percent in the past year.


The benefits of acquisitions could decline if more carriers merge, said Standard & Poor's analyst Philip Baggaley. ``If the six largest (U.S.) airlines were to combine into three they would end up with basically the same revenue, but higher labor expenses and much more debt,'' he said.

Talk of Northwest's possible purchase by American comes as Northwest is hung up in regulatory proceedings on its attempt to buy control of Continental Airlines.

Northwest in January 1998 announced plans to buy 14 percent of Continental and form an alliance thwarting an acquisition bid by Delta Air lines Inc. for Continental. The shares would carry super-voting rights equal to a 51 percent controlling stake in Continental.

The U.S. government sued Northwest in October 1998 to undo its purchase of the voting stake in Continental. As part of that transaction, the pair agreed to link their flights, frequent-flier programs and other operations. The lawsuit, which calls for Northwest to divest from Continental, is pending.

Continental, based in Houston, said this year that it has held preliminary discussions with Northwest aimed at buying back the shares currently held by Northwest.

United also has extensive routes into Europe, including London's Heathrow airport, and into Asia. The proposed acquisition is likely to face regulatory hurdles in the U.S. and in Europe.

American and Northwest

An American-Northwest combination would be ``ideal'' for American, particularly because of Northwest's Pacific routes, said Jim Eckes, managing director of Indoswiss Aviation Ltd., an airline consultancy in Hong Kong.

``American is panting at the gate to get into Asia, and this would give them an awesome presence because Northwest is so strong there,'' he said.

American Airlines' parent had a market value of $4.41 billion as of yesterday's market close, while Northwest's was $2.46 billion, giving them a combined value of $6.9 billion.

Northwest spokesman Jon Austin said the airline had no comment. He said he had seen the KSTP TV report.

Following the move by United and US Airways, Northwest's pilots ``assume that meetings and discussions may occur among the remaining airlines, in every possible combination,'' said Mark McClain, chairman of the pilots union.

At American, calls were put through to a recording by Chris Chiames, an American spokesman. For reporters calling about ``rumors of business transactions,'' he said, ``we do not comment on any rumors, nor confirm or deny them.''

Earlier Talks

It's not the first time the two airlines have talked. Northwest in February began linking some fights in California with AMR's American Eagle commuter carrier to make up for lost service in the state.

In 1991, Alfred Checchi, Northwest's chairman at the time, broached the idea with American of merging, or of selling the carrier's lucrative Pacific routes. That was at a time when Northwest suffered financial losses because of debt payments from a $3.65 billion buy-out that Checchi led in August 1989.

While AMR needs to respond to UAL's planned purchase, an acquisition of Northwest won't provide an advantage over the larger, combined rival, Donaldson, Lufkin & Jenrette analyst James Higgins said.

``I think it makes American permanently No. 2, assuming it happens,'' he said. ``They're never going to be as strong. That's the pivotal issue if United and US Airways goes through.''

Jun/02/2000 16:53 ET
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RE: Another Story...more Proof

Sat Jun 03, 2000 8:02 am

RWalley, nice piece for the forum, but please read my posting on "NW/AA possible ploy"
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RE: Northwest And American Merging!

Sat Jun 03, 2000 8:23 am

I don't really like this "merger mania". I really like NWA a lot.

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RE: Northwest And American Merging!

Sat Jun 03, 2000 9:11 am

Am I the only one who thinks that this is big news??
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RE: Northwest And American Merging!

Sat Jun 03, 2000 9:17 am

American Airlines, the second largest US carrier, has had a takeover approach rebuffed by Northwest Airlines, the world's fourth largest carrier.

Northwest is said to have told American's parent company AMR that the size of its offer was insufficient, with the Minneapolis-based carrier wanting approximately $60 a share before it would seriously consider an approach.

The exploratory offer came in the aftermath of United Airline's announcement that it was taking over US Airways. It is the latest sign that widespread consolidation is about to hit the US airline industry.

Analysts said they were unsurprised by AMR's move, as the UAL-US Airways deal meant that it needed to act to secure its position as one of the world's leading carriers. One said: "They need to work out if they are going to get serious about Northwest, and they need to do it before the government investigation of the US Airways deal starts." If AMR presses ahead with a deal, it will want to have it considered on the same government regulatory timetable as UAL-US Airways, analysts said.

Industry executives believe one of the biggest hurdles in the path of UAL's proposed bid for US Airways is the risk that other offers in the sector will raise regulatory concerns about excessive consolidation in the politically sensitive industry.

The Justice Department has promised to give United's offer close scrutiny, and had already accused American of crushing smaller rivals.

Northwest's shares rose $6 6/16, to close at $35 7/16, as the stock of AMR, American's corporate parent, slipped 5 per cent or $1 3/16 to $28 1/4.

Analysts have been tipping an AMR/Northwest deal as one of the most attractive potential combinations in the industry following UAL's announcement.

Northwest's stock has doubled since March and it now has a market value of about $2.5bn.

Samuel Buttrick, airline analyst at PaineWebber, said on Friday American may have to pay $50-$60 per share for Northwest, but cautioned that he would assign "no more than a 40 to 50 per cent probability to such a deal occuring."

One complication is likely to be Northwest's controlling stake in Continental Airlines, which is itself viewed as an attractive acquisition target for Delta Air Lines.

KLM, the Dutch carrier which has a long-standing alliance with Northwest, could also be influential in the success or failure of AMR's proposed approach.

A takeover of Northwest would fill in the gaps in the north central US for American, Susan Donofrio, airline analyst at Deutsche Bank Alex.Brown told clients this week.

The mooted deal would increase American's domestic market share from 19 per cent to 31 per cent - above the 28 per cent combined share which UAL and US Airways would command. It would also give American access to Northwest's Pacific routes, most of which centre on its hub in Osaka, Japan.
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RE: Northwest And American Merging!

Sat Jun 03, 2000 9:23 am

Based on the information above, I think there's going to be a bidding war for NW and CO. Buy the buyee's stock not the buyer's. bye.
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RE: Northwest And American Merging!

Sat Jun 03, 2000 9:58 am

I don't think that's gonna happen, although I heard a lot of rumours about this merger. American, a super mega carrier, doesn't want to merge with another airline. What is happening is that American in under pressure to buy Northwest because United just made a deal with US Airways.
I think that a merger between United and US Airways will work more easily because those two airlines have a lot of aircraft types in common, they include A32X, Classic 737's (no NG models), 767's, Beechcraft 1900's as well as Canadair RJ's. But a merger between American and Northwest is another question, think about the fleets, American has ordered NG 737's, Northwest didn't (Northwest has never operated any 737's at all). American has never ordered A32X, Northwest has a lot of them. American is retirering its last DC-10's, Northwest still has many of them and will keep them for a while. American has a bunch of 767's, Northwest doesn't have any. I'm not talking about the 757 because in both mergers, the power plants would be different. United and Northwest 757's have PW engines, American and US Airways have RR engines. Think about what it will be like managing spare parts of many different aircraft types at once!

What's gonna happen? Future will tell us...

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RE: Northwest And American Merging!

Sat Jun 03, 2000 12:15 pm

If NWA gets bought, its Dc-9, Dc-10, 747-200 will probably get retired. this may benefit Boeing in new orders as the other US airlines have mostly a Boeing fleet except for the A320s.

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RE: Northwest And American Merging!

Sun Jun 04, 2000 3:10 am

So... is it probably going to happend???

RE: Northwest And American Merging!

Sun Jun 04, 2000 4:33 am

Maybe if the NW/AA merger went through, we would not see a total integration between NW and AA for some time. AMR would be the holding company owning both airlines, like Texas Air with CO and EA. AMR would still own a market share that rivals UAL, it would simple be with two airlines. Didn't Groupe Air France do this with Air Inter as well before full integration? AA would take control of the International services and then NW would go on a fleet renewal program to bring them in line with AA. This could also ease political concerns with hubs in MSP and DTW if there is not an immediate evacuation, although I think DTW will stay and MSP & MEM will go.

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