Delta, Northwest Chart A New Course In Merger Talks
February 20, 2008: 04:57 PM EST

CHICAGO -(Dow Jones)- Merger talks between Delta Air Lines Inc. (DAL) and Northwest Airlines Corp. (NWA) are taking a different course from previous airline courtships, with new kinds of risks and rewards for airline stakeholders.
While top executives at the airlines pursue a deal, for the first time they've encouraged pilots of both carriers to work out their own agreement. In the past, airline management presented a merger to employees as a done deal, putting the burden on union employee groups to sort out their differences after the fact, which can lead to breakdowns in customer service, bad employee morale, and distractions for management.
At Delta and Northwest, boards of directors at both companies are waiting to hear from pilots before they tie the knot. The issue of integrating pilots' seniority lists appears to be the major sticking point.
"This is the first time union groups have met this way," said Ray Neidl, an analyst with Calyon Securities. While it could make the merger go more smoothly, press reports Wednesday said representatives for 12,000 pilots were at an impasse.
A failed deal among pilots would put the $20 billion merger in jeopardy. Spokespeople for the pilots said Wednesday they couldn't comment on the talks.
Neidl said he expects that the Delta and Northwest pilots will reach an accord, and will seek more favorable labor contracts with the merged airline. Current contracts with Delta and Northwest include wage and benefit concessions the pilots agreed on when both airlines emerged from bankruptcy last year.
Pilots reportedly also want equity in the merged airline. If the pilots insist on too much, management will be forced to scrap the merger, Neidl said. With fuel and other costs rising, "No airline can afford to pay more for labor," he said. Additional labor expenses must be offset by increased productivity, he said.
The pilots are Delta's only large unionized labor group, so other employees will be easier to integrate into a single workforce.
Airline Industry Consolidation
Many airline executives believe the industry needs broad consolidation to cut excess U.S. seat capacity. There's been wide speculation that a move by Delta and Northwest to become the world's biggest airline, by passenger traffic, would trigger additional airline deals. United Airlines, a unit of UAL Corp. (UAUA) is seen as a possible partner with Continental Airlines Inc. (CAL).
But airlines in the past two years have trimmed their domestic capacity growth. With most planes now flying full, airline consultant Mike Boyd doesn't buy the argument that capacity needs to be cut.
Further, he thinks that executives at Northwest Airlines may agree with him. In recent weeks, Northwest has announced new flights from hubs in Minneapolis, Detroit and Memphis. "Why would an airline be adding flights if it felt that, within a few weeks, it would need to cut capacity?," Boyd asked.
A merger of Delta and Northwest that included plans for continued expansion in the U.S. market would be more of an "anti-merger" Boyd said. A growing market share would benefit employees, customers and shareholders, he said.
An airline with a bigger competitive footprint could cut expenses with lower overhead and greater purchasing power with suppliers, said Neidl. But, since mergers are costly, shareholders wouldn't likely see a direct benefit from merger synergies for as long as two years, Neidl said.
The analyst is bullish on major U.S. airlines now, with a buy rating on Northwest, and an add rating on Delta, due to low valuations. "The U.S. airlines have already priced in a recession," he said.
-By Ann Keeton, Dow Jones Newswires; 312-750-4120; ann.keeton@dowjones.com

Govt mulls Danareksa as 'parent' for state banks

Aditya Suharmoko, The Jakarta Post, Jakarta
The government is considering state-owned investment management company PT Danareksa to be a holding company for banks which the government own a majority stake in, a minister says.
"We are still considering some options. One of them is to turn Danareksa into a holding company," State Minister for State Enterprises Sofyan Djalil said Monday.
Under the central bank's single presence policy, an investor, either from the public or private sectors, is not allowed to own a majority stake in more than one bank. Those controlling stakes in more than one bank must merge their banks, conduct an acquisition or establish a holding company at the latest by 2010.
The government has a 56 percent share in Bank Rakyat Indonesia (BRI), a 67 percent share in Bank Mandiri, a 76 percent share in Bank Negara Indonesia (BNI) and is the sole owner of Bank Tabungan Negara (BTN).
The four banks have total assets of Rp 658.5 trillion (US$71.23 billion), or 35.6 percent of the country's total banking assets.
Sofyan said that to comply with the central bank's policy, the government was considering turning Danareksa into a makeshift development bank and holding company for state banks. However, he said the decision was not yet final.
"We may instead establish a development bank, like the KfW (Bankengruppe) in Germany, or like development banks in Japan and New Zealand," he said.
KfW is a German government-owned development bank formed after World War II to support the country's economy. Its name originates from Kreditanstalt fr Wiederaufbau, which means reconstruction credit institute.
According to Sofyan, the government will seek assistance from KfW if it decides to establish a development bank.
Responding to the government's plan to turn Danareksa into a holding company, Danareksa president director Wahzary Wardaya said the company may likely be a holding company for state banks. However, he declined to comment further.
Danareksa, established in late 1976, had total assets and capital of Rp 1.97 trillion and Rp 701.48 billion as of June 2006. It has a research center that specializes in studying state-owned companies in the country.
Separately, a top banker who refused to be identified, told The Jakarta Post he did not agree with the government's plan to turn Danareksa into a holding company for state-owned banks.
"Why should the government shift a securities company? I think the government should establish a new bank rather than shifting a securities company to a holding company," he said.
He warned that Danareksa officials lacked the capacity to manage state banks.
"It is not easy to manage banks with enormous amount of capital. I doubt the current Danareksa officials can handle those banks."

Wall Street rallies on Buffett news
AP - 1 hour, 48 minutes ago
NEW YORK - Wall Street finished mostly higher Tuesday after billionaire investor Warren Buffett offered to help out troubled bond insurers, easing some of the market's concerns about further deterioration in the credit markets. The Dow Jones industrials rose more than 130 points.

UPDATE:Silicon Valley Recruiters Zero In On Yahoo Employees
February 11, 2008: 07:26 PM

(Updates with details about Yahoo's planned job cuts in fifth paragraph.)
By Scott Morrison

Of DOW JONES NEWSWIRES
SAN FRANCISCO -(Dow Jones)- Silicon Valley recruiters have quickly ramped up their efforts to lure software developers, project managers and key executives away from Yahoo Inc. (YHOO) in the wake of Microsoft Corp.'s (MSFT) $44.6 billion offer to buy the struggling Internet giant.
Microsoft's ability to retain Yahoo staff has been a key concern among Wall Street analysts, as well as at the company itself, should the software giant succeed in winning control of its target. But comments from recruiters suggest that Yahoo employees and other Silicon Valley companies already starved for talent aren't waiting around for Microsoft to win over Yahoo's management and board.
"Ninety percent of our clients are asking for Yahoo talent, particularly in the last two weeks," said Bruce Brown, managing partner at executive search firm Daversa Partners.
Brown said recruiters have been targeting Yahoo employees for several months, but interest in the company's 14,300 employees has increased in the wake of Microsoft's proposed acquisition, which the software company hopes will give it the scale and technological prowess it needs to compete with Google Inc. (GOOG) in the Internet search and advertising market.
Yahoo, under fire for losing its focus and losing ground to Google, announced just days before Microsoft's offer that it would cut as many as 1,000 jobs by mid-February. The company, however, did not provide additional details.
Craig Silverman, a partner at recruiting network and job exchange HireAbility.com LLC, said the rush to lure Yahoo talent is not unexpected given the uncertainty prompted by Microsoft's unsolicited offer. Yahoo's board on Monday rejected Microsoft's bid, raising the prospect of a drawn-out takeover battle that could last months.
"Any time recruiters sense difficult times in a company, where there could be a merger or acquisition, there is a sharklike feeding frenzy in which recruiters become more focused on attracting people from that organization," said Silverman.
Silicon Valley recruiters were not willing to discuss clients by name, but it was widely understood that most, if not all, of the industry's largest companies were eager to tap into Yahoo's talent pool. None of the top firms, including Google, Oracle Corp. (ORCL) and Saleforce.com Inc. (CRM) have publicly expressed interest in Yahoo employees.
Google said it had not changed its recruitment practices, while Oracle and Salesforce declined to comment.
A recruiter at one Silicon Valley firm, who spoke on the condition of anonymity because his firm is a client of Yahoo, said the tech titans would prefer to let recruiters cull the best Yahoo employees from a much broader pool.
"I think they don't have the internal resources to handle an influx of Yahoo people. They would rely heavily on their preferred vendors to funnel people through," the recruiter said.
Silicon Valley companies are most interested in project managers, user interface designers, mobile applications developers and software designers who have experience with Apple's Macintosh operating system, the recruiter said.
"We're focused on (Yahoo's) technical talent. That is what we're looking at," echoed Mary Voss, chief executive of Foxhunt, a boutique Silicon Valley recruiting firm.
Voss also noted the list of companies actively pursuing Yahoo employees for the first time includes a number of startups, which in the past would have had a much more difficult time attracting workers from an Internet titan such as Yahoo.
Brown agreed that suitor companies have become more interested in Yahoo following Microsoft's bid. "It's a feeding frenzy. It's just been outrageously competitive, from startups to big publicly traded companies."
Brown also said that some Yahoo executives are suddenly expressing much more interest in getting to know his recruiters as well. "Key executives we couldn't get before are spending more time getting to know us now."
Not all recruiters are seeing an increase in activity. Jason Kranz, a recruiter at executive search firm Heidrick & Struggles, said his firm had not yet noted heightened interest in top Yahoo brass. He added, however, that top- level executives that his firm typically places would be more likely to wait until a merger was completed and the combined company's structure was more clearly defined