Firms recommend Delta-Northwest merger

Delta Air Lines said Monday that four proxy advisory firms have recommended a vote in favor of its proposed merger with Northwest Airlines.

The firms — RiskMetrics Group subsidiary Institutional Shareholder Services, Glass Lewis, Proxy Governance and Egan-Jones — recommended a vote in favor of issuing Delta stock to Northwest shareholders in the merger and in favor of Delta’s proposed employee compensation plan, according to Atlanta-based Delta.

Shareholders are scheduled to finish voting on the merger at Delta’s shareholder meeting in Atlanta and Northwest’s shareholder meeting in New York on Sept. 25. Northwest is based in Eagan, Minn.

The merger also is subject to approval of the U.S. Department of Justice, which Delta and Northwest expect will issue a decision by the end of the year. If approved, the merger is expected to close shortly afterward.

According to RiskMetrics Group’s ISS, the airline industry’s difficult environment has challenged Delta and Northwest’s ability to survive as stand-alone carriers. Egan-Jones’ report said the merger will create a “globally-balanced” airline that is expected to have a strong balance sheet, though there are challenges inherent in combining the two airlines and substantial costs.

Glass Lewis and RiskMetrics Group voiced concern that certain executives stand to receive payments for a change in control. Because of a six-month “walk away” period after one year from the change in control, Northwest Chief Executive Doug Steenland could leave and be entitled to about $22.1 million, according to RiskMetrics Group’s analysis.

Glass Lewis recommended withholding votes for several Northwest directors, noting that seven of them were on the Northwest board when it adopted a “poison pill” stockholder rights plan without shareholder approval last year. The plan was amended to waive the Delta merger from the poison pill and terminate the poison pill upon closing of the merger.