Hawaiian Holdings, the parent of Hawaiian Airlines buyout deal had its shares nearly tripled on Monday after Alaska Air Group agreed to acquire it for $1.9 billion, including debt. Hawaiian stocks were trading at $13.40 in morning trade, below Alaska’s offer price of $18 per stock made public on Sunday, with some analysts saying regulatory approval was far from certain.
The transaction is valued at approximately $1.9 billion. This includes $900 million of Hawaiian Airlines debt.
Hawaiian Airlines buyout deal
Hawaiian stocks have taken a beating in recent months due to the impact of the Maui wildfires, high fuel costs and jet engine recall issues at some of its Airbus SE planes. Its shares have fallen 52.6% so far this year.
Hawaiian presently has a negative price-to-earnings (PE) ratio of 1.5, reflecting losses, compared to a positive forward 12 months PE ratio of 8.2 for Alaska Air, according to LSEG.
Alaska and Hawaiian said on Sunday the deal, valued at $929.4 million on an equity basis, will expand their networks and offer more choices to passengers.
“This transaction makes good common sense for both airlines,” TD Cowen analyst Helane Becker wrote in a note on Hawaiian Airlines buyout deal.
What the Alaska Hawaiian deal entitle?
In the event of deal materializing, Alaska Air’s fleet will expand to 365 narrow and wide body planes. They will serve 138 destinations in total, including non-stop service to 29 top international destinations in the Americas, Asia, Australia and the South Pacific. This Hawaiian Airlines buyout deal is regarded to be customer-friendly as it is anticipated to expand choice for consumers on the U.S. west coast and the Hawaiian Islands. Honolulu will become a key hub for the combined entity.
The combined entity will be based in Seattle. It will be led by Ben Minicucci, the CEO of Alaska Airlines. A dedicated leadership team will be formed to plan out a successful and seamless integration process.
Expansion of Alaska
The Hawaiian Airlines buyout deal will enable Alaska to grow in the lucrative Asia Pacific market, while Hawaiian customers can travel non-stop to the U.S. mainland, Becker added. Hawaiian Airlines valuation which had decline will get a boost with the deal.
Even after the deal closure, both companies will maintain their respective brands. The news of the buyout offers a big relief to Hawaiian Airlines.
Hawkish U.S. Justice
However, regulatory resistance to the merger is a possibility. Under a hawkish Biden administration, the U.S. Justice Department had filed a lawsuit in March to stop JetBlue from buying Spirit Airlines, saying the planned merger “would put travel out of reach for many cost-conscious travelers”.
JetBlue shares pared losses from premarket to trade flat, while Spirit shares were up 6.5% on Monday.
Alaska Air on the deal
Alaska Air’s CEO Ben Minicucci in an interview on Sunday expressed confidence that regulators would approve the deal by the end of 2024 because the two airlines have just 12 overlapping routes out of the 1,400 flights they collectively operate.
Shares of Seattle-based Alaska Air were down 17.6%.
