Directors of both Delta and Northwest agreed to merge the two companies. Holders of shares of Northwest would receive 1.25 shares of Delta in the proposed deal.
Rumors surface on Jan 9 and are confirmed on Jan 15 of merger talks with Delta. Airline industry mergers historically drive up share prices because they consolidate markets, reduce competition, and help drive up ticket prices.
Hedge fund Pardus Capital Management sent a letter to Delta calling for a merger with United; analysts had previously suggested that a Delta merger with Northwest would make more strategic sense. Northwest stock slid on news of the investor's letter.