Bruce Feiler - Where God Was Born, Abraham, Walking The Bible

You Can't Get to Heaven Without Changing Planes in Atlanta
Wednesday, January 10, 2007

That's what we used to say growing up in Savannah, and the reason was Delta, one of the backbones of Atlanta's boosteristic-biz mentality. Cut to today. I don't particularly have a horse in the Delta-U.S. Air merger talks that are all over the media today, from the NYT to the WSJ, even though half my life's savings are caught up in Delta Frequent Flyer points. But I do have a horse in my predictions game with my brother, and one of the big differences we have is on this issue: I have that the merger will happen; he has that it won't. Here's the analysis from the NYT Dealbook blog:

After crunching the numbers on US Airways‘ latest bid for Delta Air Lines, several equity analysts said Wednesday that it seemed to present a better payout for creditors than Delta’s standalone reorganization plan. Their estimates were slightly different, but three of them calculated that US Airways was offering at least $2 billion more than Delta would be worth if it emerged from bankruptcy on its own. Their analysis suggests that US Airways’ new offer, consisting of $10.2 billion in cash and stock, may get serious consideration from Delta’s creditors.

“US Airways believes a merger with Delta can produce $1.65 billion of annual synergies, which, we think is doable,” Merrill Lynch’s Michael Linnenberg wrote in a research note Wednesday. He said a combination would produce a value of $12.7 billion to $15.4 billion, with a midpoint of $14.1 billion. That compares to a value of $10.7 billion, at the midpoint, under the Delta plan.
“While it is likely that a US Airways/Delta merger could take longer to close than Delta emerging from bankruptcy, one cannot ignore the magnitude of the cash component of the US Airways offer,” Mr. Linnenberg wrote.

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Posted by B Feiler at 7:15 PM
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