Delta, Northwest shareholders to vote Thursday

Shareholders of Delta Air Lines and Northwest Airlines will meet Thursday to vote on the carriers’ proposed merger, and are expected to reach a milestone toward closing the deal.

The shareholders will meet in different cities at different times. Delta shareholders will meet at 2 p.m. Thursday at the Georgia International Convention Center in College Park. Northwest shareholders will vote on the merger as part of their annual meeting at 9:30 a.m. Thursday at the AXA Equitable Center in New York. They also will vote on twelve directors to hold office until the merger closes, if the deal is completed.

Observers said they expected the vote to be a “rubber stamp” approval of the merger. Four proxy advisory firms all recommended that shareholders vote in favor of the deal.

“We’re confident that the shareholders will approve it,” said Northwest chief financial officer Dave Davis.

Another hurdle to clear will be approval from the U.S. Department of Justice, which is expected to issue a decision by the end of the year.

To airline consultant Darryl Jenkins, the volatile economy makes a stronger argument for the merger.

“There’s some strength in being large, especially when you’re kind of completing Delta’s network,” Jenkins said. “Northwest is a very good fit to Delta, probably one of the better fits we’ve ever seen.” The potential for revenue is “greater than the sum of the two,” though it will take a year or two to reach that potential, he said.

Atlanta-based Delta will issue about 339 million shares to acquire Eagan, Minn.-based Northwest and Northwest shareholders will receive 1.25 shares of Delta stock for each share they own. The transaction was worth $3.6 billion on April 14, the day the deal was announced.

Proxy Governance Inc., one of the proxy advisory firms, said in a report it supported the board’s “early and active engagement in the process,” starting from November 2007.

After the merger, Delta shareholders will own about 47 percent of Delta’s shares while former Northwest shareholders will own about 40 percent, according to Delta.

Among Delta’s largest shareholders are JP Morgan Chase & Co., Wellington Management Co. LLP, Fidelity Management & Research and Lord Abbett & Co.

Northwest’s largest shareholders are Wellington Management, Fidelity Management & Research, Wayzata Investment Partners LLC, Harbinger Capital Partners Funds and MFC Global Investment Management.

Also at its Thursday meeting, Delta will seek approval for an employee compensation plan which includes allocating 15 percent of stock to employees, including 3.5 percent for about 600 to 700 management employees; 3.5 percent for Delta pilots; 2.38 percent for Northwest pilots; and 4 percent for other employees at the closing of the merger. Another 1.62 percent would be set aside for future grants to workers.

Existing stock options, restricted stock and performance-based awards that may be vested and cashed out total $5.4 million, with up to $2.2 million for chief financial officer and president Edward Bastian. due to change in control provisions, according to the Proxy Governance report.

Not everyone is in favor of the merger. Some voices that initially emerged against the deal have died out, but the International Association of Machinists union is still against it.

The union, which represents ramp workers, customer service agents, reservations agents and others at Northwest, sent a memo to Northwest shareholders asking them to vote against the merger, citing risks of integrating the two airlines and analysts who question the benefits of airline mergers.

The machinists union also said that the Delta and Northwest frozen pension plans’ combined shortfall of about $7 billion “would be an enormous burden on the merged airline.”

“We do feel the combined company will be at greater risk than two smaller companies running independently,” said machinists union spokesman Joseph Tiberi.

The union plans to picket at Delta’s shareholder meeting in College Park, and plans to rally along with the Association of Flight Attendants union at Northwest’s shareholder meeting in New York.