By Mykhaylo Kulyk for FIN 333 @ DePaul University
Executive Summary:
The current proposition of Delta Airlines to acquire North-West Airlines, that has been announced on April 1, 2008, is portrayed to be a successful procedure for two companies and beneficial for the shareholders. The new company would emerge as one of the largest cargo and passenger carrier which will offer superior service and wide array of destinations to its customers. The predictions are made about the possible outcome of the acquisition based on analysis of financial statements of two companies, review disclosed adjustments of the deal and current stock prices. I suggest that it is important to recognize the fact that Delta expects one-time cash costs of $1 billion to integrate with NWA. At the time when the merger was proposed the oil prices were much lower then they are right now. This already resulted with decline in number of travelers, increasing ticket prices and overall worsening of the financial market. The fact that both companies just resolved their issues with bankruptcy negatively affects the perception of their financial strength. All of that seems to lead to a conclusion that the acquisition isn’t going to be successful if implemented in the current market and with proposed terms. Since the acquisition should create a stronger company, and in our case it only improves the financial health of Delta but not so much that it could be successfully competing in the industry. Also, even though the current shareholders of NWA are proposed 1.25 shares of stock of DAL in exchange for a share of NWA. In my opinion the shareholders of NWA should not allow this acquisition because it’s not in their best interest because this procedure weakens their current position.