On Monday, shares of airline Virgin America VA are soaring over 40% after fellow airliner Alaska Air Group ALK said it would acquire the company for $2.6 billion, beating out JetBlue Airways JBLU in a bidding war.
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The all-cash deal offers Virgin stockholders $57.00 per share, an 85.8% premium compared to the stock’s closing price on March 22, the day before reports emerged that the company was looking for buyers.
With Virgin debt added in, the total value of the takeover, already agreed by the boards of both companies, will run to about $4 billion.
Virgin America started with the support of Richard Branson a minority owner and began flying during 2007. The airline slowed down its rapid growth and got help from low fuel prices.
As a result, Virgin America’s most valuable assets are actually its terminal space at San Francisco International Airport and Los Angeles International Airport along with landing rights at Love Field in Dallas, LaGuardia in NY and Reagan National in DC, Bhaskara said.
With complimentary West Coast-based networks, operational excellence and a strong commitment to innovation, the joining of Virgin America and Alaska will expand our existing California footprint and grow our transcontinental network, giving you more travel options with 1,200 daily departures nationwide.
The combination of the two airlines will make Alaska the fifth-largest USA carrier, vaulting it up from its current eighth place.
Following the merger, it also would fly from San Francisco to several key markets including New York, Los Angeles, Las Vegas, Chicago, Boston, San Diego and Washington D.C. And with this new state of business, Alaska Air Group have become the highest rated carrier on the U.S. West Coast. Alaska has been a loyal Boeing customer for years, flying nearly entirely a fleet of 737s, manufactured just a few miles from its headquarters.
Asian airlines have also expressed interest in buying Virgin America, although they would have to partner with a USA bidder under foreign ownership rules governing US airlines.
Bank of America Merrill Lynch, UBS Investment Bank and Cowen & Co were financial advisers to Alaska Air, while Evercore Group LLC advised Virgin America.
The combined group will be headquartered in Seattle with annual revenues of around $7 billion.
Six others, including Virgin America, declined from 2014, and Spirit Airlines was new to the ratings.
The Alaska-Virgin deal is subject to approval by shareholders of both airlines and government antitrust regulators.
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Virgin America Inc.’s stock jumped $15.38, or 39.5 percent, to $54.28 in premarket trading Monday.
