Airlines cleared for takeoff; Circuit City waits for financing; First Charter, Fifth Third approved by Fed

By Aaron Hochman-Zimmerman

New York, April 15 - Stocks fought higher on Tuesday but left Delta Air Lines Inc. and Northwest Airlines Corp. in the dust as the airlines' shares dropped after they announced their long-awaited merger.

Shares of retailers Circuit City Stores Inc. and Blockbuster Inc. were nearly flat as investors considered the wisdom of their merger and waited to hear details of Blockbuster's plan to finance the deal.

In finance, First Charter Corp. stock popped with the champagne corks after the Federal Reserve approved its takeover by Fifth Third Bancorp.

Meanwhile in pharmaceuticals, Kinetic Concepts Inc. fell after it announced plans for the financing of its deal to buy LifeCell Corp.

In shipping, shares of Quintana Maritime Ltd. and Excel Maritime Carriers Ltd. were better as the two closed their deal.

The Dow Jones Industrial Average bounced through the day, but ended better by 60.41, or 0.49%, at 12,362.47, while the Nasdaq Composite Index added 10.22, or 0.45%, to finish at 2,286.04.

The S&P 500 picked up 6.11, or 0.46%, to close at 1,334.43.

Airlines pull chocks, can they fly?

Shares of Northwest (NYSE: NWA) lost $0.94, or 8.38%, to finish at $10.28 as the agreement to merge with Delta (NYSE: DAL) was finally announced.

Delta will pay 1.25 shares for every Northwest share, putting the $13.10 per share deal at a 17% premium to Monday's closing price.

Shares of Delta flew lower by $1.32, or 12.60%, at $9.16.

Still, before everyone involved can dig into the peanuts and break out the little bottles of booze, the deal will need the approval of the Department of Justice. Many expect that because the two generally serve different destinations approval will be granted by the end of the year, a market source said.

"The new carrier will offer superior route diversity across the U.S., Latin America, Europe and Asia and will be better able to overcome the industry's boom-and-bust cycles," said Doug Steenland, Northwest's chief executive officer.

"They seem to be pretty gung ho about it," a market source said about the airlines' management.

However, the deal faces opposition from the Northwest pilots and many lawmakers.

Minnesota's senators Amy Klobuchar and Norm Colman, along with governor Tim Pawlenty will look over the deal in order to preserve the best interests of their state where Northwest is headquartered, the Minneapolis Star Tribune reported.

Sen. Johnny Isakson, R.-Ga., will help Delta overcome the "Washington obstacles," such as the objections of Rep. James Oberstar, D.-Minn., the Atlanta Journal-Constitution reported.

Also, reports speculated that a successful merger may encourage other airlines to follow the flight path.

Next in line for takeoff, behind Northwest and Delta, may be a deal between Continental Airlines Inc. (NYSE: CAL) and UAL Corp. (Nasdaq: UAUA) according to the Chicago Tribune.

However, "I think Continental's management is too sharp to merge with United and get their ancient fleet," a market source said.

Shares of Continental slipped $1.53, or 6.99%, to end at $20.36 while shares of United lost $1.29, or 5.46%, to finish the session at $22.32.

Another market source is commented that anti-trust regulators would have to consider the airline industry as a whole if a second merger became a reality.

The conventional wisdom is that "it's got to happen before the Republicans leave," he said about the anti-trust regulators.

"Maybe they won't allow it," he said about either deal, and perhaps "that's why it's down," he said about Northwest's share price.

"Northwest is down over 8%, when do you see that?" he asked about a stock on the day a deal is announced.

"The market has a lot of trepidation about the deal," he added.

First Charter, Fifth Third seconded by Fed

Shares of First Charter (Nasdaq: FCTR) soared by $5.78, or 25.59%, to close at $28.37 as the Federal Reserve decided to allow its acquisitions by Fifth Third (Nasdaq: FITB).

Shares of Fifth Third picked up $0.24, or 1.26%, to close at $19.26.

"We weren't expecting the Fed approval," a market source said.

"We are happy that we have received approval on all applications we filed with bank regulatory agencies related to our purchase of First Charter," said Kevin Kabat, president and chief executive officer of Fifth Third in a press release.

"We're looking forward to moving into the exciting North Carolina market," he added.

The deal is expected to close in the second quarter.

Circuits suited for Blockbuster?

Shares of Circuit City (NYSE: CC) eased $0.07, or 1.41%, to $4.90 as the market mulled over the up to $1 billion offer from Blockbuster (NYSE: BBI).

Shares of Blockbuster were only lower by $0.01, or 0.36%, at $2.80.

A market source used the analogy of a man with a broken right leg helping a man with a broken left, to describe the deal.

Still, "I think it has a chance," he admitted. "The big question is the financing."

The deal will live or die based on how committed Carl Icahn is to the financing, he said, but there is still reason to put off over-thinking the situation.

"We're not going to speculate on it until a deal's announced," he said.

Kinetic looks to fund LifeCell deal

Shares of LifeCell (Nasdaq: LIFC) added $0.18, or 0.36%, to $50.68 as its merger partner Kinetic Concepts (NYSE: KCI) announced it will fund the deal with a $600 million seven-year convertible bond.

Shares of Kinetic Concepts dropped $3.40, or 7.79%, to close the day at $40.27.

Quintana sails on schedule

Shares of Quintana Maritime (Nasdaq: QMAR) improved by $0.73, or 3.10%, to $24.29 as it closed its $2.45 billion merger with Excel Maritime (NYSE: EXM) on schedule.

Excel shares were better by $0.43, or 1.50%, to close at $29.07.

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