Alaska Airlines parent company Alaska Air Group has reached a deal to acquire Virgin America for approximately $4 billion, creating the 5th largest airline in the United States.
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Alaska Air will pay $57 per share in cash for Virgin America, which is roughly 86% higher than Virgin’s stock price in March when the airline was considering a sale.
He said that Alaska Airlines approached Virgin America with a proposal to merge; his influence over the ultimate decision was limited because, as a foreign citizen, he is held by USA law to a voting stake of less than 25 percent. It went public in November 2014 with an initial stock offering that jumped 30 percent on its first day of trading.
Virgin, which in 2013 turned profitable, earned over $340.5 million in 2015, which was a company record. The low cost of fuel has made the airlines profitable, and they are adding new planes to their fleets.
The deal would vault Alaska over JetBlue the losing bidder for Virgin America to become the nation’s fifth-biggest airline by passenger traffic.
The merger would help Alaska Air compete against Delta Air Lines Inc and American Airlines Group Inc, which have embarked on major expansions in Los Angeles, Hackel added.
He also said the merger would be a win for Alaska Air because Virgin America has routes with access into slot-controlled airports that Alaska doesn’t now have.
The newly combined business, which is to be based in Seattle, Washington, will have over 280 aircraft. It may mean fewer airline choices and lesser discounts for air passengers, but Alaska runs a solid airline intended to keep the customers happy and flying.
The owner of Alaska Airlines announced early this morning that it’s agreed to buy Virgin America for $2.6-billion, out bidding Jet Blue.
Branson has been a prolific spokesman for Virgin America, attending inaugural flights for the carrier and even penned a love letter to Dallas as Virgin America fought to gain two gates at Dallas Love Field.
Virgin Airlines founder Richard Branson said he was “sad” and disappointed about the merger. Alaska Air said Monday, April 4, 2016, that the deal will expand its route network.
Bank of America Merrill Lynch (BAC.N), UBS Investment Bank (UBSG.S) and Cowen & Co (COWN.O) were financial advisers to Alaska Air, while Evercore Group LLC advised Virgin America.
Alaska shares fell $3.09, or 3.8 percent, to $78.92, while Virgin shares soared $16.21, or 41.7 percent, to $55.11. Virgin America shareholders still have to vote on the deal and it still needs approval by regulators.
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A report from the Wall Street Journal on Saturday revealed that the Alaska Air Group Inc. could likely end up acquiring Virgin America.
