CORPORATE RESTRUCTURING

Meaning :
Corporate Restructuring means any change in the business capacity or portfolio that is carried out by inorganic route or any change in the capital structure of a company that is not in the ordinary course of its business or any change in the ownership of a company or control over its management or a combination of any two or all of the above. Types of Corporate Restructuring

Mergers / Amalgamation Acquisition and Takeover Divestiture Demerger (spin off / split up / split off) Reduction of Capital Joint Ventures Buy back of Securities

Merger / Amalgamation: A merger is a combination of two or more businesses into one business. Laws in India use the term amalgamation for merger. Amalgamation is the merger of one or more companies with another or the merger of two or more companies to form a new company, in such a way that all assets and liabilities of the amalgamating companies become assets and liabilities of the amalgamated company.

Merger through Absorption:- An absorption is a combination of two or more companies into an existing company. All companies except one lose their identity in such a merger. For example, absorption of Tata Fertilisers Ltd (TFL) by Tata Chemicals Ltd. (TCL).

Merger through Consolidation:- A consolidation is a combination of two or more companies into a new company. In this form of merger, all companies are legally dissolved and a new entity is created. Here, the acquired company transfers its assets, liabilities and shares to the acquiring company for cash or exchange of shares. For example, merger of Hindustan Computers Ltd, Hindustan Instruments Ltd, Indian Software Company Ltd and Indian Reprographics Ltd into an entirely new company called HCL Ltd.

Acquisitions and Takeovers: An acquisition may be defined as an act of acquiring effective control by one company over assets or management of another company without any combination of companies. Thus, in an acquisition two or more companies may remain independent, separate legal entities, but there may be a change in control of the companies .When an acquisition is forced or unwilling, it is called a takeover.

Divestiture: Divestiture means an out sale of all or substantially all the assets of the company or any of its business undertakings / divisions, usually for cash (or for a combination of cash and debt) and not against equity shares. In short, divestiture means sale of assets, but not in a piecemeal manner. Divestiture is normally used to mobilize resources for core business or businesses of the company by realizing value of non-core business assets.

Demerger: Demerger is a form of corporate restructuring in which an entitys business operations are segregated into one or more components.

Demerger can take three forms:

Spin-off Split-up Split-off Reduction of Capital: Reduction of Capital is a process by which a company is allowed to extinguish or reduce liability on any of its shares in respect of share capital not paid up, or is allowed to cancel any paid-up share capital which is post

or is allowed to pay-off any paid up capital which is in excess of its requirements.

Joint Venture: Joint Venture is an arrangement in which two or more companies (called jointventure partners) contribute to the equity capital of a new company (called joint venture) in pre-decided proportion. For e.g. Maruti Suzuki

Buy back of Securities: When a company is holding excess cash, which it does not require in the medium term (say three to five years); it is prudent for the company to return this excess cash to its shareholders. Buy-back of securities is one of the methods used to return the excess cash to its shareholders.

INDIAN COMPANY EXAMPLE

A STUDY OF MERGERS BETWEEN KINGFISHER AIRLINES AND DECCAN AIRLINES

INTRODUCTION - About Aviation Industry

India is one of the fastest growing aviation markets in the world. The Airport Authority of India (AAI) manages a total of 127 airports in the country, which include 13 international airports, 7 custom airports, 80 domestic airports and 28 civil enclaves. There are over 450 airports and 1091 registered aircrafts in the country. The genesis of civil aviation in India goes back to December 1912 when the first domestic air route between Karachi and Delhi became operational. In the early fifties, all airlines operating in the country were merged into either Indian Airlines or Air India. And, by virtue of the Air Corporations Act 1953, this monopoly continued for the next forty years. The Directorate General of Civil Aviation(DGCA) controlled every aspect of aviation, including granting flying licenses, pilots, certifying aircrafts for flight and issuing all rules and procedures governing Indian airports and airspace. Finally, the Airports Authority of India (AAI) was assigned the responsibility of managing all national and international airports and administering every aspect of air transport operation through the Air Traffic Control. Merger/Acquisition: Summary: The Deal: Vijay Mallya paid Rs 550 Cr to acquire 26% equity in Deccan. Subsequently, he paid an additional Rs 418 Cr for a further 20% stake through an open offer.

Enterprise value: Rs 2,115 Cr when Mallya acquired 26% Market Share of Air Deccan: 18% Fleet with Air Deccan: 43 Combined market share: 29% Share bought at 2007 was RS.155/share CMP=Rs48/share (2009) KINGFISHER AIRLINES a review:

Kingfisher Airlines is a private airline based in Bangalore, India. Currently, it holds the status of India's largest domestic airline, providing world-class facilities to its customers. Owned by Vijay Mallya of United Beverages Group, Kingfisher Airlines started its operations on May 9, 2005, with a fleet of 4 brand new Airbus - A320, a flight from Mumbai to Delhi to start with. The airline currently operates on domestic as well as international routes, covering a number of major cities, both in and outside India. In a short span of time, Kingfisher Airlines has carved a niche for itself in the civil aviation industry. History Kingfisher Airlines proved to be a stiff competition for other domestic airlines of India, with its brand new aircraft, stylish red interiors, stylishly dressed cabin crew and ground staff. The airline introduced in-flight entertainment (IFE) systems, for the first time to Indian consumers. The IFE systems were provided on every seat, even on the domestic flights. The airline offers attractive services to its on board passengers. Years following its inception proved to be beneficial for the airline, in terms of its booming business, with a good track record of customer satisfaction. However, it faced a worsening economic scenario in 2008.

Kingfisher was engaged earlier in the following businesses: o Scheduled Air Transport Services o Scheduled Air Transport Ground handling services o Training academy Services Commercial Airline Business

Merger Motive Vijay Mallaya had a vision. His successful Kingfisher Airlines had completed a merger agreement with low cost carrier airlines Deccan Aviation on May, 2007. With this deal he planned to become the dominant low cost carrier in the country.

 DECCAN AVIATION LIMITED A Review Deccan Aviation, promoted by Capt. G.R. Gopinath, Capt. K.J. Samuel and Capt. Vishnu Singh Rawal, was initially incorporated as a private limited company on June 15, 1995 in Karnataka with the main object of pursuing chartered aviation services both for commercial and non commercial purposes in India and to provide all aviation related services. It was converted into a public limited company in 2005. The companys vision was To empower every Indian to Fly and its mission To demystify air travel in India by providing reliable low cost and safe travel to the common man by constantly driving down the air fares as an ongoing mission. As is evident from their mission statement, the strategy was to garner market penetration through cost reduction. Deccan was engaged earlier in the following businesses: Scheduled Air Transport Services Non -Scheduled Air Transport Services Scheduled Air Transport Services Scheduled Air Transport Services Commercial Airline Business Charter Services Operations Market Share Data Market share Data of Oct 2005 Airline Percentage Indian Airlines 28% Jet Airways 35% Air Sahara 12% Air Deccan 11% King Fisher 6% Spice Jet 5% Others 3% Total 100% Market Data of combined entity was 25% at 2007 Market data of Kingfisher on July 2009 is 22%

KINGFISHER & AIR DECCAN MERGER Key Features

On 1st June 2007, the Board of Air Deccan approved the allotment of equity share of 26% to UB group & its nominees. The shares were allotted at Rs.155 per share approximately a 10% premium for the current market price (CMP). The UB group made the money in two phases: Rs.150 Crore as initial investment & Rs396 Crore at the on or before the end of June. Once the investment process is complete, the UB group will become the single largest share holder in the Deccan Aviation ltd. UB group will make an open offer to

acquire minimum 20% to all shareholders of Deccan aviation at a price of Rs.155. The Kingfisher-Air Deccan group will be the largest domestic airline with a fleet of 71 aircraft including 41 Airbus aircraft and 30 ATR aircraft. This combined airline powerhouse will cover all segments of air travel from low fares to premium fares and offer the maximum number of 537 daily flights covering the single largest network in India connecting 69 cities whilst taking advantage of unparallel synergy benefits arising from a common fleet of aircraft. For the near future, Kingfisher will continue to serve the corporate and business travel segment while Air Deccan will focus on serving the low fare segment but with improved financial prospects for both carriers. Kingfisher Airlines and Air Deccan will, henceforth, work very closely together to exploit the significant synergies that exist in the areas of operations and maintenance, ground handling, vastly increased connectivity, feeder services, distribution penetration etc.

KINGFISHER & AIR DECCAN- ADVANTAGE of MERGER

The fresh equity capital will allow the Deccan to pay the loans & to fund various infrastructure projects. Reduction of cost by sharing infrastructure The merger ensures that Kingfisher does not need to invest more in infrastructure or in spare planes, thereby reducing costs and increasing profitability.

The combined share of the two carriers will increase the Market share. As per the existing laws Kingfisher Airlines would not be able to operate on international routes until 2010. However Air Deccan would be eligible from the second half of next year as its five-year ceiling is coming to an end.

 KINGFISHER & AIR DECCAN - OPERATIONAL SYNERGIES

Kingfisher and Air Deccan have exactly the same fleet of aircraft, the same equipment in terms of engine, in terms of brakes and in terms of avionics. This provides a huge opportunity on saving in engineering and maintenance cost.

The airlines will achieve perfect synergies in the backend (operations and maintenance, ground handling, vastly increased connectivity, feeder services, distribution penetration) while preserving the front-end and that will enable both Deccan and Kingfisher to be profitable.

Apart from ground handling synergies, there is a whole host of items where duplication is completely unnecessary and can now be avoided. Infrastructure Synergy.

Kingfisher and Air Deccan will now be able to access ground infrastructure at 65 airports, of which more than 28 are common to both the set ups.

The new entity will have over 71 aircraft. Route Synergy

On the most lucrative of routes, New Delhi-Mumbai, that on its own accounts for more than half of India's 33 million passenger traffic, the two carriers will now account for a total of 155 flights.

According to Dr.Mallya kingfisher is considering swapping or switching in coordination with each other to rationalize the fleet structure. Investment synergy

Both airlines have orders for about 90 aircraft currently placed with European aircraft major, Airbus Industries.

Kingfisher has placed orders for new aircrafts at higher prices as compared to Air Deccan. The alliance with Air Deccan may provide it the opportunity to renegotiate its rates with the manufactures thereby saving substantially.

ARE THESE AIRLINES MERGERS WORKING?

The answer is probably NO. For two simple reasons:

1) First Reason is Subjectivity: The business investor cant resist such a glamorous business. Glamour of the airlines: No industry other than film-making industry is as glamorous as the airlines. Airline tycoons from the last century, like J. R. D. Tata and Howard Hughes, and Sir Richard Branson and Dr. Vijaya Mallya today, have been idolized. Airlines have an aura of glamour around them, and high net worth individuals can always toy with the idea of owning an airline. All the above factors seem to have resulted in a "me too" rush to launch domestic airlines in India.

2) The second Reason is objectivity:

Pricing pressure exerted by other low cast carriers Pricing Pressure Declining yields: LCCs and other entrants together now command a market share of around 46%. Legacy carriers are being forced to match LCC fares, during a time of escalating costs. Increasing growth prospects have attracted & are likely to attract more players, which will lead to more competition. All this has resulted in lower returns for all operators.

CHINESE COMPANY EXAMPLE

A STUDY OF LENOVO GROUP LIMITED ACQUIRED IBMS PC UNIT

INTRODUCTION Lenovo group limited Lenovo Group Limited is a Chinese multinational technology firm with headquarters in Beijing, China, and Morrisville, North Carolina, United States. It sells personal computers, tablet computers, smartphones, workstations, servers, electronic storage devices, IT management software and smart televisions. It markets the ThinkPad line of notebook computers and the Think Centre line of desktops. Lenovo has operations in more than 60 countries and sells its products in around 160 countries. Lenovo was founded in Beijing in 1984 and incorporated in Hong Kong in 1988 under its previous name, Legend. Lenovo is listed on the Hong Kong Stock Exchange and is a constituent of the Hang Seng China-Affiliated Corporations Index, often referred to as "Red Chips." ABOUT LENOVO

1984

Established as Legend Group in Beijing Had product and distribution facilities in US, UK, Mexico, Malaysia, Hungry, China, and Brazil

2003 2005 2006

Changed its brand from Legend to Lenovo Acquired IBMs PC division and became the worlds third biggest PC-maker Lenovo started becoming a partner sponsor in sports events and sigh the

contract to become the sponsor of Beijing Olympic 2008 2007 Started implementing a worldwide expansion plan by building the second plant in India. Lenovo tried to solidify its presence in US by selling both brand Lenovo and ThinkPad (a brand of IBM) In August announced the taking over Packard Bell BV, the 5th biggest PCmaker in Western Europe 2008 2009 2010 Lenovo enters the Worldwide consumer PC market with the new "Idea" Brand Launched the new strategy Protect and Attack Lenovo introduced over 20 new devices at the consumer Electronic show in Las Vegas

2011

In January Lenovo formed a PC joint venture with Japanese IT company NEC, In quarter 3 Lenovo acquired Medion, a German electronics manufacturing company

2012

Lenovo took the 2nd place in global PC market share with the share around 15%

 INTRODUCTION IBM

Lenovo's success is attributed to its long-term focus on emerging markets and successful overseas M&As. facing a low profit margin in the PC business and fierce competition from tablet PCs and smart phones, the company is embarking on plans to diversify its businesses.

THE MOST FAMOUS M&A IS THE MERGING AND ACQUISITION OF IBM'S PC UNIT.

Lenovo acquired IBM's personal computer business in 2005. Lenovo has maintained a substantial research and development presence in North Carolina. Lenovo's acquisition of IBM's personal computer division accelerated access to foreign markets while improving both its branding and technology.Lenovo paid US$1.25 billion for IBM's computer business and assumed an additional US$500 million of IBM's debt. This acquisition made Lenovo the third-largest computer maker worldwide by volume.

In regards to the purchase of IBM's personal computer division, Liu Chuanzhi said, "We benefited in three ways from the IBM acquisition. We got the ThinkPad brand, IBM's more advanced PC manufacturing technology and the company's international resources, such as its global sales channels and operation teams. These three elements have shored up our sales revenue in the past several years." IBM acquired an 18.9% share of Lenovo in 2005 as part of Lenovo's purchase of IBM's personal computing division. Since then IBM has steadily reduced its holdings of Lenovo stock. In July 2008, IBM's interest in Lenovo fell below the 5% threshold that mandates public disclosure. Although Lenovo acquired the right to use the IBM brand name for five years after its acquisition of IBM's personal computer business, Lenovo used it for only three years.

On 7 December 2007, an event called "Lenovo Pride Day" was held. After words of encouragement from management, employees ceremoniously peeled the IBM logos off their ThinkPads and replaced them with Lenovo stickers.

WHY WOULD IBM SELL ITS PRESTIGIOUS PC UNIT?

According to the financial report submitted by the IBM in the year 2004, the PC division lost 397million dollar in 2001, 171 million in 2002, 258 million in 2003, and 139 million in the first half of the 2004. For the consecutive years, IBM was in a lost position. The active pricing strategies of enterprises such as Dell, Hewlett-Packard (HP) had a serious impact on the sales of the IBM PC; For IBM, the PC unit is "tasteless". So that IBM is to leave unprofitable PC market, and put in more effort in the lucrative high-end servers, software and IT services business.. In May 2002, IBM's CEO Sam Palmisano visited Lenovo, the two sides to revisit the issues. Lenovo is then enthusiastic about the implementation of diversification strategy, but also aware of the importance of the internationalization, so its possible for later further negotiations. From the end of 2003 to December 8, 2004, this merger lasted an entire year. December 8, 2004, Lenovo officially announced the completion of the acquisition of IBM's global PC business.

 BENEFITS TO LENOVO THROUGH COMPUTER DIVISION

ACQUISITION OF IBM'S PERSONAL

Accelerated access to foreign markets while improving both its branding and technology. This acquisition made Lenovo the third largest computer maker worldwide by volume then. After the acquisition, Lenovo take over IBMs notebook and desktop business and other related business worldwide, including its customers, distribution and marketing channels.

We got the ThinkPad brand, IBM's more advanced PC manufacturing technology and the company's international resources, such as its global sales channels and operation teams. Acquisition agreement also point that the executive candidate: Stephen Ward (the senior manager of IBM) became the CEO and board directors of Lenovo group.

PROBLEMS FACED BY LENOVO AFTER ACQUISITION

But after the M&A, Lenovo faced various serious problems, including the culture difference, the human resource, the difficulties in integration, the high salary cost, the supply chain issues, the financial distress.

But Lenovo eventually solved the problems and survived. 1. To solve the problem of the big gap of the salaries between the employees of the Lenovo and the employees of the IBM PC Unit, Lenovo planed not to change the salary of the employees of IBM within 3 years and their stock options are transformed into the stock option of Lenovo. And in the three year time, Lenovo will adjust and establish a unified salary system. 2. To solve the difficulty of the integration of the brand, Lenovo require a five-year time to create an independent famous brand. In the agreement between Lenovo and IBM, Lenovo can use the IBM brand in five years, and after that, Lenovo can only use thinkpad and thinkcenter. 3. To solve the supply chain issues, by the end of 2005, Lenovo had invited William j. Amalio to became the CEO of the Lenovo Group, replace the former CEO, Stephen m. Ward. Amalio optimize and improve the international supply chain of Lenovo during his tenure. Lenovo launched the reconstruction project of the supply chain worldwide through improving the infrastructure of the IT as well as the efficiency of the supply chain. 4. The financial distress had negative influences on the progress of Lenovo. After the acquisition, the net profit of Lenovo drop significantly from 1092 million Hong Kong dollar in 2005 to 216.528 million Hong Kong dollar in 2006; the EPS also drop from 14.97 HK cents to 1.95 HK cents. The lost of revenue is attribute to the lost of the market share of the IBM PC unit. After hardworking, but in 2007, Lenovo has basically complete the pre-integration of the PC unit. And the financial indicators were all getting better. The profit of Lenovo increased to 1256.88 million Hong Kong dollars, and its EPS increase to 14.35 in 2007. However, Lenovo was far from perfect. In 2008, Lenovo surrendered the worst financial report since its acquisition of the IBM PC unit. The profit is only 23.3 million dollar, a decrease of 78%, compared with the profit last year. At Feb, 5, 2009, Lenovo announced a loss of 97 million dollar; And at the same time,

Lenovo found that it had lost the dominant market share in mainland China. Its really a tough time for Lenovo. Lenovo made correct decision during this period of time. Lius comeback must be the most correct one. Liu adjust the company's business strategy to maintain a good share of domestic sales and continue to expand overseas markets. Lenovo Group immediately reduced losses in 2010, achieved profitability and got a profit of 1,009 million Hong Kong dollar in fiscal year of 2010. Lenovo eventually survived.

THE CRITICAL SUCCESSFUL FACTORS THAT ARE THE FOCUS OF THE SUCCESSFUL M&A ACTIVITIES

1. Synergistic Effect The key of a successful M&A case is whether the mergers and the merged company can complement other advantages and make one plus one bigger than two. The merging of Lenovo and IBMs personal-computer department has great synergistic effect in many respects. Including, the synergy of businesses, the synergy of distribution channel, the synergy of the brand and management and the synergy of cost saving

2. Integrated the human resources and resolved the labor cost problem successfully At first, there was tremendous difference between Lenovos and IBMs human resources strategy. The major problem was the large wages gap between Lenovo and IBM, the wages of previous IBMs employees made up a great cost. In order to retain the previous IBMs employees and reduce the di scontent of Lenovos employees, Lenovo gave himself three years transitional period and formed a unified pay system within three years.

3. Resolved the difficulty of blending two brands As many companies seek growth through the development of new products, cobranding strategy provides a way to develop new products. Lenovo planned to utilize the well-known IBM brand to explore the international market hence increase the revenue. However, combining two brands may cause brand

meaning to transfer in ways that were never intended. Signing an agreement to retain the right to use the trademark of IBM for five years, Lenovo can use this buffer time to make the global users to recognize its name. In 2011, Lenovo overtook Acer and became the third largest PC supplier globally. We can see that Lenovo has gradually built its reputation in the international market.

4. Well-designed corporate management plan After the acquisition, Lenovo experience a tough period, with serious financial problems as well as plunging stock price. Faced with these problems, Chuanzhi Liu designed an accurate plan with two steps to make Lenovo achieve success in the acquisition. Owing the accurate action, Lenovo achieved brilliant success in profit again in 2010 .

AMERICAN COMPANY EXAMPLE

A STUDY OF DELTA AIR LINES INC. AND NORTHWEST AIRLINES INC. MERGER

INTRODUCTION DELTA AIR LINES INC.: On April 14, 2008, Delta Air Lines Inc. (Delta) and Northwest Airlines Inc. (Northwest) announced merger plans pending the necessary approvals from the US Department of Justice (DOJ) and the European Commission. The approvals were received on October 29, 2008, after which the two airlines started the merger integration process. The merger gave birth to the world's largest airline in terms of revenue passenger kilometers. With this merger, northwest became a wholly-owned subsidiary of Delta. The new airline retained the name Delta and was headquartered in Atlanta. Ed Bastian (Bastian), Chief Financial Officer and President of Delta, became the President and Chief Executive Officer (CEO) of the merged entity and Northwest's President and CEO, Doug Steen land (Steen land), became a member in the Board of Directors of the merged entity. As a result of the merger, Northwest's shareholders would receive 1.25 shares in the new airline for each share they had in Northwest. The merged entity would offer its services to customers in 375 cities and 66 countries worldwide. Even though the managements of both the airlines were confident about the potential synergies of the merger, some analysts had their apprehensions about it. These analysts opined that as some of the routes of the two airlines overlapped, some 'overlapping flights' would be dropped during integration and the consumers would be faced with fewer choices and higher prices.

According to Fitch Ratings, Unfortunately, such consolidation may have adverse impacts on the consumer through increased air fares. Analysts were also concerned that after this merger, other airlines may also start discussions among themselves to merge, and that would lead to less competition. They also pointed out that finalizing a combined seniority list of pilots of both the airlines would be a major challenge. In late January 2009, although the pilots union of both the airlines agreed on a joint contract, they could not agree to how seniority for the pilots would work under the merged entity.

Post merger integration: On October 29, 2008, Delta's management announced that Delta and Northwest would integrate their operations over the next 12 to 24 months (Refer Box II to know more about the integration process of Delta and Northwest). Merged entity was expected to incur a one-time cost not exceeding US$ 600 million to integrate the airlines. It was expected to generate US$ 2 billion in annual revenue and cost synergies.

On December 02, 2008, Delta announced that it would reduce its consolidated system capacity by between 6 and 8 percent in 2009, compared to 2008.

The Road Ahead On January 07, 2008, Delta reported passenger traffic for December 2008. Delta's domestic traffic had decreased 3.7% year over year while international traffic had increased by 9.2% year over year. Northwest's domestic traffic had decreased 4.7% year over year and international traffic had decreased by 2.0% year on year.

An agreement has been reached, and barring any roadblocks from antitrust authorities Delta Airlines and Northwest Airlines are merging and will operate under the Delta Airlines name.

Richard Anderson, Delta CEO, said: "We said we would only enter into a consolidation transaction if it was right for all of our constituencies; Delta and Northwest are a perfect fit."

Delta Airlines released information outlining the basic elements of the deal and what ramifications they foresee for both the new mega-airline, and its passengers.

DETAILS OF THE MERGER AND WHAT THE MERGED DELTA AIRLINES AND NORTHWEST AIRLINES:

Delta's headquarters were in Atlanta, and the merged Delta will retain its world headquarters in Atlanta.

A mainline fleet of nearly 800 aircraft with nearly 75,000 employees worldwide. Northwest Airlines shareholders will receive 1.25 Delta shares for each Northwest share they currently own.

No hub closures The Delta pilot leadership reached an agreement on a post-merger contract including a 3.5 percent equity stake in the new company along with other enhancements to their current contract.

From Delta, "Frontline employees of both airlines will be provided seniority protection through a fair and equitable seniority integration process, as the airlines are combined. In addition, U.S.-based non-pilot employees of both companies will be provided a 4 percent equity stake in the new airline upon closing."

 REASONS CITED FOR THE MERGER:

An effective way to offset higher fuel prices. From Delta, "Record fuel prices have fundamentally changed the economics of the airline industry. Fuel is the highest single expense for Delta and Northwest, significantly eroding the financial benefits of restructuring and placing the airlines' new found strength and stability at long-term risk. At the beginning of 2007, oil prices were approximately $55 a barrel. Now, oil prices have nearly doubled. This dramatic run-up in the price of oil makes the transaction even more compelling."

More efficient airline. Increase international presence. Ability to fund long-term investment in the airline business.

ADVANTAGES OF MERGER:

Combining Delta and Northwest will create a global US carrier that can compete with foreign airlines - foreign airlines that continue to increase service to the United States.

Customers and communities to benefit from access to a global route system. More destinations mean more schedule options, and more opportunities to earn and redeem frequent flyer miles.

A more financially stable airline. Delta customers will benefit from Northwest's greater service to Asian markets. Northwest's customers will benefit from Delta's strengths across the Caribbean, Latin America, Europe, the Middle East and Africa.

"Delta and Northwest's complementary networks and common membership in the Sky Team alliance will ease the integration risk that has complicated some airline mergers. The carriers participate in a joint SkyTeam frequent flyer program with common customer lounges and partner networks."