Continental's ticket to mergermania could cost $100

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By BILL HENSEL JR.=

Continental's ticket to mergermania could cost $100=0A=0ABy BILL HENSEL JR.=
=0ACopyright 2008 Houston Chronicle =0ATOOLS=0AEmail Get section feed =0APr=
int Subscribe NOW =0AComments (1) Recommend =0A=0ACall it Continental Airli=
nes' $100 ticket to freedom, roughly the cost of a one-way fare from Housto=
n to Corpus Christi.=0ARight now, Northwest Airlines has a so-called "golde=
n share" of Houston-based Continental, giving it power to nix virtually any=
 merger deal involving the carrier.=0AThat's unless Northwest merges first =
with Delta Air Lines or another carrier =97 and merger talk is rampant thes=
e days. Under that scenario, Continental has the right to buy back the gold=
en share for a crisp $100 bill and be free chart its own course.=0ADelta re=
portedly is in talks with both United Airlines and Northwest about a merger=
 with one or the other, and the speculation has heated up major airline sto=
cks that have suffered since summertime. They rose again Tuesday, and Conti=
nental closed up $1.92 per share to $25.27 in trading on the New York Stock=
 Exchange after Standard & Poor's predicted any Delta deal would draw Conti=
nental into play.=0A"We believe that it is likely that an announced merger =
agreement between Delta and either Northwest or United would trigger negoti=
ations between the remaining airline and Continental Airlines," the agency =
said in a release Tuesday.=0AUnited's chief executive, former Houstonian Gl=
enn Tilton, has said in the past that he believes a merger of United and Co=
ntinental would have considerable benefits, Standard & Poor's noted.=0A"At =
present, Northwest can block a merger involving Continental in most circums=
tances, but if Northwest itself enters into a merger with another large air=
line, that blocking right would end," the agency added.=0AOf course, the sh=
are would be moot if Continental and Northwest were left to mingle.=0AConti=
nental had no comment Tuesday on any of the merger talks. But top executive=
s of the carrier are expected to be peppered with merger questions during a=
 conference call Thursday to release quarterly and year-end earnings.=0ACon=
tinental's chairman and chief executive, Larry Kellner, told employees in a=
 taped message over the weekend that it has a good plan if the industry rem=
ains as it is. If it changes, it will do what is in the best interest of al=
l its stakeholders, he said.=0AAlthough Delta has not confirmed merger talk=
s, the head of the airline's pilots' union =97 who sits on Delta's board of=
 directors =97 told fellow flyers in an internal letter last week that indu=
stry consolidation may be "very close," Standard & Poor's noted.=0A"Similar=
ly, the CEO of Northwest is reported to have recently told that airline's e=
mployees that the company would carefully consider any merger proposal, and=
 that the right transaction could be favorable for Northwest," the credit r=
ating agency said.=0ATilton has been speaking out in favor of consolidation=
 ever since United came out of bankruptcy in early 2006.=0AContinental and =
Northwest came together in early 1998, when Continental was resisting merge=
r overtures from Delta. Northwest had bought a controlling stake in Contine=
ntal from an investor group, and the two carriers formed an alliance that s=
till exists.=0AThe Justice Department sued after their stock deal, though, =
saying Northwest's ownership stake violated antitrust laws and would hurt c=
onsumers by reducing competition. But the government never challenged the a=
lliance.=0AContinental later asked to buy back its stock from Northwest, bu=
t the Minnesota-based carrier refused. And as Justice Department lawyers pr=
epared the antitrust case for trial, Continental sided with the government.=
=0AAfter two days of courtroom testimony in late 2000, the two airlines rea=
ched a settlement under which Northwest agreed to sell Continental most of =
the stock =97 6.7 million shares =97 but retain the golden share. The deal =
also extended the alliance, which runs to 2025.=0Abill.hensel@xxxxxxxxx

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