New York, April 14 - Delta Air Lines Inc. and Northwest Airlines Corp. said they will merge in an all-stock transaction with a combined enterprise value of $17.7 billion.
The two carriers said the new airline, to be called Delta, "will provide employees with greater job security, an equity stake in the combined airline, and a more stable platform for future growth in the face of significant economic pressures from rising fuel costs and intense competition."
Delta chief executive officer Richard Anderson will be chief executive officer of the combined company, Delta chairman Daniel Carp will become chairman of the new board and Northwest chairman Roy Bostock will become vice chairman. Ed Bastian will be president and chief financial officer. The board will include 13 directors, seven from Delta, including Anderson, and five from Northwest, including Bostock and Doug Steenland, the current Northwest CEO. One director will come from the Air Line Pilots Association.
The company headquarters will be in Atlanta. Delta said it is committed to retaining significant jobs, operations and facilities in Minnesota.
The merger is expected to generate more than $1 billion in annual revenue and cost synergies, the airlines said. It will result in one-time cash costs of no more than $1 billion for integration.
Expected liquidity at closing will be nearly $7 billion.
Northwest shareholders will receive 1.25 Delta shares for each Northwest share they own. The ratio represents a premium to Northwest shareholders of 16.8% based on April 14 closing prices. The transaction is expected to be accretive to current Delta shareholders in year one, excluding one-time costs.
The merger is subject to the approval of Delta and Northwest shareholders and regulatory approvals. Regulatory review is expected to be completed later in the year.
The new airline will retain all its hubs at Atlanta, Cincinnati, Detroit, Memphis, Minneapolis/St. Paul, New York-JFK, Salt Lake City, Amsterdam and Tokyo-Narita.
Delta also said it has reached agreement with pilot leaders to extend its existing collective bargaining agreement through the end of 2012. The agreement, which is subject to pilot ratification, facilitates the realization of the revenue synergies of the combined companies once the transaction is completed. It also provides the Delta pilots a 3.5% equity stake in the new company and other enhancements to their current contract.
Frontline employees of both airlines will be provided seniority protection through what Delta and Northwest called "a fair and equitable seniority integration process."
U.S.-based non-pilot employees of both companies will be provided a 4% equity stake in the new airline.
Delta's financial advisers were Greenhill & Co. and Merrill Lynch & Co. and its legal advisers were Wachtell, Lipton, Rosen & Katz and Hunton & Williams, LLP. Financial advisers to Northwest were Morgan Stanley and J.P. Morgan Securities and legal advisers were Simpson Thacher & Bartlett LLP and O'Melveny & Myers, LLP.
| Acquirer: | Delta Air Lines Inc.
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| Target: | Northwest Airlines Corp.
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| Announcement date: | April 14
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| Price per share: | 1.25 Delta shares
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| Stock price of target: | NYSE: NWA: $11.22
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