Alaska Air acquire Virgin America for 2.6 billion USD, in a deal representing a 47% premium of the airline shares. Alaska Air was bidding with JetBlue for the acquisition and finally won with offer of 57 USD per share, mostly because of its clean balance that will enable it easier to borrow funds to carry out the acquisition. According to the agreement, Virgin America will have to pay 78.5 million USD in case of termination of the transaction. The deal is expected to conclude until the end of the year, which will allow Alaska Air to expand on lucrative markets such as San Francisco and Los Angeles.
The merger must be approved by US regulators. The deal will create the fifth largest airline in the country, although it would still be much smaller than in the first four airlines. Currently Virgin America account about 1.5% of domestic flights, while Alaska Air has market stake of about 5%, but due to overlapping the market share of the merged company is not expected to exceed 6%.
Alaska Air is an airline with 84 years of tradition, based in Seattle, USA. The carrier has an investment rating, no net debt and 1.3 billion USD in cash, with market capitalization of 10.2 billion USD. The deal expects to increase Alaska Air revenue by 27% and contribute to its profit from the first year.