Seattle-based Alaska Air is set to purchase Virgin America in $4 billion deal. The buyout will allow Alaska Air to grow its services into some of the country’s profitable hubs including Los Angeles and San Francisco.
Alaska Air Set To Buy Out Virgin America In $4bn Deal
The board of directors from both Alaska Air and Virgin America companies agreed to a deal, which will see Alaska Air acquired Virgin America for an equivalent of $57 a share.
Sir Richard Branson, Virgin’s founder indicated that it was sad that there as nothing he could do to stop the deal.
This buyout is the second commercial airline merger in the US since the merger involving American Airlines and US Airways in 2013, creating the world’s biggest carrier.
Listed on the US stock market in 2014, Virgin America takes up just 1.5% of the US domestic market.
In a statement on the company’s blog Sir Richard wrote, ‘I would be lying if I said that I am not sad that out wonderful airline is merging with another.
Given that I am not American, the US Department of Transportation required that I take some of my shares in Virgin America as non-voting shares thereby reducing any influence I would have had over the takeover. Sadly, there is nothing I could have done to stop it.”
He also pointed out that merging is an unstoppable trend given that the four largest airlines now have a share of 80% of the US market.
Alaska Air and its regional partner airlines own a estimated 5% of the US domestic flight market across more than 100 cities in the US, Mexico, Costa Rica, and Canada.
If Virgin shareholders and the US government regulators approve the deal, the merger will be expected to come to completion by January 1, 2017.
Alaska Air and JetBlue had been involved in a fierce bidding battle over Virgin Air, with the price of the buyout continuing to rise. Alaska won largely due its solid balance sheet which will enable the company to borrow funds to finance the acquisition.