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B R E A K F A S T W I T H T H E F O O L Monday, November 6, 2000 benjamin.rogers@enron.com _________________________________________________________________ REGISTER TO BECOME A FOOL -- GET FREE STUFF! http://www.fool.com/m.asp?i=3D182767 _________________________________________________________________ Sponsored By: Credit Suisse First Boston CSFB and DLJ are now one. #1 in M&A deals. #1 in IPO volume. #1 in high-yield debt underwriting. The best part? That=01,s just the beginning. http://www.lnksrv.com/m.asp?i=3D182768 "There is the greatest practical benefit in making a few failures early in life." -- Thomas H. Huxley, biologist CONTINENTAL, NORTHWEST DEAL DURING TRIAL With their federal court trial at hand, the two major air carriers do a deal. By Tom Jacobs Feeling the heat of the Department of Justice's (DOJ) antitrust trial against them, defendants Northwest Airlines (Nasdaq: NWAC) and Continental Airlines (NYSE: CAL) announced today an agreement intended to end the dispute. The DOJ sued the airlines in 1998 over a deal giving Northwest 54% voting control over Continental -- preventing Continental's takeover by Delta Air Lines (NYSE: DAL). Under the deal, Continental would buy back Northwest's common stock. The parties will ask the federal judge to delay the trial, which started last week, while the carriers work out the details. A CAREFUL DEAL The deal has two goals: to address the DOJ's belief that the Northwest-Continental combination would lead to higher prices for consumers, and to retain the benefits of the two air powers' alliance. The pact extends the alliance through 2025 and changes the Northwest-Continental relationship. According to the deal, Northwest will pay $450 million for 6.69 million Continental Class A shares, and hold on to 2.6 million Class B shares. Continental will recapitalize, reclassifying each Class A share into 1.32 shares of Class B common stock. Continental will issue Northwest a special series of preferred stock, which will give Northwest blocking rights over certain Continental business combinations and change of control between Continental and a third party. Continental can redeem its preferred stock under certain conditions, such as a change of control at Northwest. A DELICATE BALANCE The industry and the government are groping in the post-deregulation era to weigh the needs of consumers against cutthroat worldwide airline competition. For example, the DOJ is separately reviewing United Airlines' (NYSE: UAL) $4.3 billion purchase of US Airways Group (NYSE: U). All the airlines have formed alliances similar to Northwest's and Continental's, involving the now-common practice of code-sharing, which means putting customers who buy tickets with one airline on the other airline's flights, and offering reciprocal frequent-flyer programs and airport lounge rights. The trial began last week after a week's delay, during which settlement talks continued. But the trial pressure ultimately caused a change at Northwest, which rejected earlier this year Continental's buyback offer. At that time the two agreed to reduce Northwest's power over Continental's daily operations -- but it apparently didn't satisfy the DOJ. Pending the judge's decision on the seven-day delay, Continental and Northwest plan to execute the agreement in one week. They expect it will take two months to close the deal, which would be subject to settlement of the litigation with the DOJ. _________________________________________________________________ NEWS TO GO The Wall Street Journal reported that tobacco companies Lorillard Tobacco, owned by Loews Corp. (NYSE: LTR), and Liggett Group, owned by Miami's Vector Group (NYSE: VGR), will announce a $8 billion settlement in federal court tobacco litigation in Brooklyn. The move is said to include a 30-year payment schedule, with Lorillard paying the bulk -- $7.5 billion. The Journal reports that the parties hope to insulate themselves from liability from the Florida state court $144.87 billion judgment. The two tobacco companies split from their colleagues after the Florida verdict and have been negotiating with other plaintiffs' groups seeking a class action before U.S. Judge Jack Weinstein of Brooklyn, famed for his handling of mass tort litigation cases such as the Agent Orange and asbestos class-action lawsuits. Santa Clara, Calif. computer chip maker Transmeta reportedly plans to hold its initial public offering this week. Transmeta makes microprocessors said to use less power and extend battery life in PC notebooks and Internet appliances. Expected investor demand led Transmeta last Friday to raise its projected IPO share price range to $16-$18 from $11-$13. Apparently, interest remains high despite last week's big news that IBM (NYSE: IBM) canceled plans to use a Transmeta chip in a new laptop computer. Computer networking product maker 3Com (Nasdaq: COMS) agreed to settle shareholder lawsuits related to its 1997 $8.5 billion merger with U.S. Robotics. The settlement will be for $259 million. Shareholders alleged that 3Com inflated its stock price by giving rosy financial projections and delaying -- or hiding -- the news of a huge backlog of unsold U.S. Robotics modems, while executives of both companies sold 4 million shares with 3Com stock at its peak. Those who bought 3Com stock between April 23 and November 5, 1997, are eligible to share in the settlement. After last week's decision by media giant Bertelsmann AG to ally with Napster and finance its move to a royalty-paying music service, two top executives of Bertelsmann's BMG Entertainment unit quit. Chairman Michael Dornemann and President Strauss Zelnick said they would depart, reportedly unhappy with new directions at Bertelsmann and BMG's reduced role in television and the Internet. Under Zelnick, BMG's album market share increased 50%, from 13% to 20%, and the company grew to own more than 200 record labels in 54 countries. Zelnick exits with a sweet severance package estimated at between $20 million and $50 million. Check out Friday's market wrap-up with one swift click! http://www.fool.com/m.asp?i=3D182769 _________________________________________________________________ EDITORS' PICK 'Tis the season to begin considering some year-end tax planning tips. http://www.fool.com/m.asp?i=3D182770 _______________________________________________________________ -News & Commentary http://www.fool.com/m.asp?i=3D182771 -Fool Community http://www.fool.com/m.asp?i=3D182772 -Post of the Day http://www.fool.com/m.asp?i=3D182773 -Latest Fribble http://www.fool.com/m.asp?i=3D182774 -Latest Market Numbers http://www.fool.com/m.asp?i=3D182775 ____________________________________________________________ My Portfolio: http://www.fool.com/m.asp?i=3D182776 My Discussion Boards: http://www.fool.com/m.asp?i=3D182777 My Fool: http://www.fool.com/m.asp?i=3D182778 Fool.com Home: http://www.fool.com/m.asp?i=3D182779 My E-Mail Settings: http://www.fool.com/m.asp?i=3D182780 Sponsored By: Credit Suisse First Boston CSFB and DLJ are now one. #1 in M&A deals. #1 in IPO volume. #1 in high-yield debt underwriting. The best part? That=01,s just the beginning. http://www.lnksrv.com/m.asp?i=3D182781 FREE FOR FOOLS! Investor's Business Daily will send you a free copy of 24 Essential Lessons for Investment Success when you sign up for a free trial subscription of their newspaper. http://www.lnksrv.com/m.asp?i=3D182782 TRY THE ALL-CASH DIET Get your spending under control with this report from Soapbox.com. http://www.lnksrv.com/m.asp?i=3D182783 FOOL DIRECT E-MAIL SERVICES Need to change your address or unsubscribe? You can also temporarily suspend mail delivery. Click here: http://www.fool.com/community/freemail/freemaillogin.asp?email=3Dbenjamin.r= ogers @enron.com< Have ideas about how we can improve the Fool Direct or new e-mail products you'd like to see? Try our discussion board: http://www.fool.com/m.asp?i=3D182784 ____________________________________________________ © Copyright 2000, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. . MsgId:=20 msg-13531-2000-11-06_9-24-52-3389247_2_Plain_MessageAddress.msg-09:26:05(11= -06 -2000) X-Version: mailer-sender-master,v 1.84 X-Version: mailer-sender-daemon,v 1.84 Message-Recipient: benjamin.rogers@enron.com
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