Delta-Northwest Turbulence?

Posted by: Dean Foust on January 28

The Atlanta Journal-Constitution reported over the weekend that the merger talks between Delta and Northwest had hit a snag over — what else? — the roles of the CEOs of each company in the combined company. The AJC reports that Delta CEO Richard Anderson (right) is angling to be CEO of the combined airline — which isn’t surprising and actually makes sense, given that in a previous life he was CEO of Northwest.

The sticky part, however, is what to do with Northwest CEO Doug Steenland (left). In many mergers, the executive of the “acquired” company — which I think is the role Northwest is being made to play here, even though this will likely be a stock swap with no premium paid to Northwest shareholders — is named “non-executive chairman” of the combined company. Which is sticky because Steenland used to work under Anderson back when Anderson was running the show at Northwest. Awkward, indeed.

I say this deal still gets done. In fact, I think this was…

a strategic leak from either Delta or one of the investment bankers who gets paid if the deal gets done, all to put pressure on Steenland to drop the ego act and acquiesce to the deal. Truth is, the bulk of Delta and Northwest's shares are held by hedge funds who bought up debt during the bankruptcies of both airlines and then converted the debt into shares when the two airlines took their stocks public again.

And the hedge funds are in no mood to put up with dueling egos, and wield too much power here to let the CEOs kill the deal. This gets done, and probably will be announced within the next week or two. The airlines would like for the deal to be reviewed by the Bush Administration, not the Clinton/Obama Administration, and that augers for a quick deal.