Delta Airlines (NYSE:DAL) announced that it has formed a special board committee to evaluate strategic options after being pressured by an activist hedge fund. Pardus Capital Management, which holds stakes in Delta and United, sent a letter to Delta Management Tuesday renewing its call for airline consolidation and advocating a Delta-United merger. Shareholders pushed up the stock of both companies in response.

Pardus noted in their letter that they believe it is, "imperative that Delta enter into a merger transaction with another carrier given the rapid rise in fuel prices and increased risk to the business as a stand alone entity." The letter came in response to word that Delta had consulted industry experts, including a former Continental Airlines chief executive. Some believe that this may have caused concern that Delta was looking elsewhere for merger possibilities.

Pardus insisted that a merger between Delta and United could result in $585 million in synergies along with other benefits that would result in a combined company stock worth $53 per share - a 75% improvement over today. The hedge fund even offered to support the Delta management team leading the strategic direction of the combined entity.

"We have been consistent in our public statements that Delta believes that the right consolidation transaction could generate significant value for our shareholders and employees and that strategic options should be evaluated," said Delta in a statement. "With oil at over $90 a barrel, this analysis takes on a heightened importance as we factor those prices into our long-term planning process."

In the end, this is all good news for Delta shareholders and may finally mark an end to the problems that have plagued the company before it was forced to declare bankruptcy and emerge in debt. These factors make DAL a stock worth watching closely!

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Och-Ziff Capital Management (NYSE:OZM) became yet another public hedge fund after shares opened even, priced in middle of their range at $32.00 per share today on the NYSE. Wall Street appears to remain skeptical as to the viability of a public hedge fund after Blackstone's blockbuster initial offering in June, which was followed by a series of negative tax law changes.

Och-Ziff Capital Management was founded in 1994 by former Goldman Sachs trader Daniel Och and the Ziff publishing family. The firm institutional alternative asset management firm and an alternative asset manager has approximately $26.8 billion of assets under management for over 700 fund investors. It invests in equity securities, convertible securities, and debt instruments. It also trades in high-yield debt, options futures, forwards, swaps, other derivatives, private securities and assets, real estate entities, and other investments.

Och-Ziff posted 2006 net income of $588 million on revenue of $1.01 billion after returning 16.7 percent annually to investors over its 13-year history. The company is formed as a limited partnership, which is a tax structure that currently enjoys a lower tax rate. Instead of being charged a regular income tax, the managers can collect their income taxed under the capital gains tax. However, tax law has changed and this company may face higher taxes after a few years of being grandfathered.

In the end, Och-Ziff is a successful hedge fund with excellent returns. However, risks associated with potential tax liability just over the horizon combined with the bad press many hedge funds have received over excess fees may weigh into the share price. Regardless, this stock is definitely one worth watching!

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Kraft Foods (NYSE:KFT) bowed to activist pressure last week by appointing two Peltz-approved directors to the company's board. The move follows pressure from the activist to spin-off the company's Post cereals and Maxwell House Coffee divisions to unlock shareholder value. Shares rose marginally on the news as shareholder are hoping that such initiatives now take hold.

Kraft reached an agreement to appoint two new directors to the company's board in exchange for a "standstill agreement" that prevents Peltz from publicly criticizing management or the growth strategy of the company for the next two years. The activist also gave up any rights to solicit proxies and agreed to vote for incumbent directors during the next election.

"We see the agreement as a pragmatic path forward for Kraft," said a spokeswoman. "Kraft adds two directors, Trian pledges support for our board, and the agreement clarifies our relationship with Trian."

Peltz has been targeting the food industries recently, targeting not only craft but also Cadbury Schwapps. The activist investor is known for sending whitepapers to the company documenting his reasoning for certain actions. And while his plans for Kraft were never made public, there was a lot of speculation that the plan called for a spin-off of two key business segments.

In the end, this is good news for shareholders as it means Peltz's plan will likely receive serious consideration. If implemented, we can assume that it will result in substantial value being unlocked for shareholders in the long-term. Combined, these factors make KFT a stock worth watching closely!

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