Virgin America (VA) Soars on Merger with Alaska Air Group (ALK)

Virgin America Merger Alaska Air

The shares of Virgin America Inc (NASDAQ:VA) are trading higher today following the announcement that it will be acquired by Alaska Air Group, Inc. (NYSE:ALK), the parent company of Alaska Airlines.

The stock price of Virgin America surged 42% to $55.26 per share at the time of this writing around 1:20 in the afternoon in New York.

Transaction details

Alaska Air agreed to purchase Virgin America for $57 per share in cash, representing a total equity value if $2.6 billion. The deal created a premier carrier in the West Coast and the 5th largest airline in the United States.

It also acquired Virgin America’s existing debt and capitalized aircraft leases. The total value of the transaction is approximately $4 billion.

The combined company expects to achieve $225 million in total annual net synergies at full integration. Its estimated annual revenues are more than $7 billion.

Alaska Air expected the deal to be accretive to adjusted earnings per share in the first full year, excluding integration costs.

The merger expands the existing footprint of Alaska Airlines in California and boosts its platform for growth. It also strengthens its competitiveness against the four largest airlines in the United States.

More attractive flight options for customers

In a statement, Alaska Air CEO Brad Tilden said, “Our employees have worked hard to earn the deep loyalty of customers in the Pacific Northwest and Alaska while the Virgin America team has done the same in California. Together we will continue to deliver what customers tell us they want: low fares, unmatched reliability, and outstanding customer service.”

Tilden added that the company will offer customers with more attractive flight options for nonstop travel given its expanded network and strong presence in California.

On the other hand, Virgin America president and CEO David Cush said, “Our mission has always been to create an airline that people love – and we accomplished that while changing the industry for the better. Joining forces with Alaska Airlines will ensure that our mission lives on and that the stronger, combined company will continue to be a great place to work and an airline that focuses on an outstanding travel experience.”