Friday, 29 May 2015
Last updated 6 min ago
Nov 15 2007 | 7:48am ET
Delta Air Lines and United Airlines are a step closer to creating the world’s largest air courier, and hedge fund Pardus Capital Management couldn’t be happier.
The $3 billion New York fund manager sent a letter to both airlines urging them to commence merger talks. And although both denied that talks have begun, Delta CEO Richard Anderson said his company has set up a special committee to explore its options, though he said Pardus’ claim that Delta must merge or die is “inaccurate and ill-founded.”
Pardus, which owns 7 million Delta shares and 5.6 million shares of United parent UAL Corp., said it also considered a Delta merger with Continental Airlines and Northwest Airlines. According to the Pardus letter, a Northwest merger would create the greatest net synergies of $1.5 billion, but could result “in the need for a potential follow-on transaction at a later date.” A Continental deal would produce no synergies.
The hedge fund said a merged Delta and United would result in $585 million in synergies and “more network breadth than any other transaction.”
“We believe it is imperative that you seek to enter into a merger transaction with another carrier given the rapid rise in fuel prices and the increased risk to the business as a stand-alone entity,” Pardus President Karim Samii and principal Shane Larson wrote.
May 27 2015 | 2:15pm ET
Support Hedge Funds Care, also known as Help For Children (HFC), by participating in this year's raffle. All proceeds go to support HFC's mission of preventing and treating child abuse. Read more…