Hawaiian Airlines’ parent has struck a $1.9 billion buyout deal with Alaska Air

Dec 4 (Reuters) – Shares of Hawaiian Airlines parent Hawaiian Holdings ( HA.O ) nearly tripled on Monday after it agreed to buy Alaska Air Group ( ALK.N ) for $1.9 billion, including debt.

Hawaiian shares were trading at $13.40 in morning trading, while Alaska’s offer price of $18 per share was made public Sunday, with some analysts saying regulatory approval was uncertain.

The company’s shares have fallen in recent months due to the impact of the Maui wildfires, higher fuel costs and jet engine recall problems on some of its Airbus SE ( AIR.PA ) planes. Its shares have fallen 52.6% so far this year.

Hawaiian Holdings shares have underperformed peers over the past year

According to LSEG, Hawaiian currently has a negative price-earnings (PE) ratio of 1.5, compared to a positive forward 12-month PE ratio of 8.2 for Alaska Air, reflecting losses.

Hawaiian Holdings hasn’t reported an adjusted profit in three years

Hawaiian Airlines flights on April 28, 2020 in Honolulu, Hawaii due to business disruptions due to the coronavirus disease (COVID-19) Daniel K. Sitting idle on the runway at Inouye International Airport. Picture taken on April 28, 2020. REUTERS/Marco Garcia/File photo Get license rights

Alaska and Hawaii signed a $929.4 million equity deal on Sunday that will expand their networks and offer travelers more choices.

“This transaction makes good common sense for both airlines,” TD Cowen analyst Helen Becker wrote in a note.

The deal will help Alaska grow in the lucrative Asia Pacific market, while Hawaiian customers can travel nonstop to the U.S. mainland, Becker added.

“The high premium on this deal is justified by the extensive network synergies the combined company can achieve with minimal investment,” said Craig Jenks, president of Airline/Flight Projects, a New York-based aviation consultancy. 270% premium.

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However, regulatory opposition to the merger is likely. The U.S. Justice Department filed a lawsuit in March to block JetBlue from buying Spirit Airlines ( SAVE.N ).

JetBlue shares pared losses to trade flat in premarket trading, while Spirit shares rose 6.5% on Monday.

Shares of Seattle-based Alaska Air fell 17.6%.

Reporting by Anantha Aggarwal and Shivansh Tiwari in Bangalore; Editing by Krishna Chandra Eluri and Shinjini Ganguly

Our Standards: Thomson Reuters Trust Principles.

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