Alaska Air Group, the parent company of Alaska Airlines, announced plans Monday to take over Virgin America for $57 per share in cash, representing a total equity value of $2.6 billion. Including Virgin America's debt and aircraft lease obligations, the transaction value of the deal will amount to $4 billion, Alaska Air said in a statement Monday.
Shares of Virgin America soared more than 30 percent in pre-market trading on the announcement. Alaska Air's offer represents a premium of about 47 percent to Virgin America’s stock price at Friday's close.
The deal is expected to be accretive to Alaska Air’s adjusted earnings per share in the first full year, and will increase annual revenue by 27 percent to more than $7 billion, the U.S. carrier said. Virgin America is 54 percent-owned by Richard Branson’s Virgin Group Ltd. and New York-based Cyrus Capital Partners LP.
Alaska Air, currently the sixth largest U.S. airline by traffic, is set to move up to No. 5 after the merger, eclipsing JetBlue, which currently holds that spot, the Wall Street Journal reported. The deal would also save the combined company $225 million annually in net synergies after full integration.
In 2015, Alaska Air recorded a full-year adjusted net income of $842 million, up 47 percent over 2014.
The combined entity will be headquartered in Seattle under the leadership of Brad Tilden, the chairman and CEO of Alaska Air Group. The merger has been unanimously approved by the boards of directors of both companies.
The deal is one of the largest since the wave of consolidation in the aviation sector between 2008 and 2013 brought 80 percent of American air travel into the hands of just four large companies: American, Delta, Southwest and United Airlines.