Hawaiian Airlines’ parent soars after $1.9 billion acquisition agreement with Alaska Air
Shares of Hawaiian Holdings Soar After Acquisition Announcement
(Reuters) – Shares of Hawaiian Holdings (HA.O), the parent of Hawaiian Airlines, nearly tripled on Monday after Alaska Air Group (ALK.N) agreed to acquire it for $1.9 billion, including debt.
Hawaiian shares were trading at $13.40 in morning trade, below Alaska’s offer price of $18 per share made public on Sunday, with some analysts saying regulatory approval was far from certain.
The company’s shares had 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 (AIR.PA) 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.
The 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.
“The high premium of the deal is justified by the extensive network synergies the combined entity would be able to achieve, with minimal further investment,” said Craig Jenks, president of New York-based aviation consultancy Airline/Aircraft Projects, in reference to the 270% premium.
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 (SAVE.N), 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.
Shares of Seattle-based Alaska Air were down 17.6%.
Reporting by Ananta Agarwal and Shivansh Tiwary in Bengaluru; Editing by Krishna Chandra Eluri and Shinjini Ganguli
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What are the potential benefits and drawbacks of the merger between Alaska and Hawaiian, and how might regulatory resistance affect the airline industry
Shares of Hawaiian Holdings, the parent company of Hawaiian Airlines, experienced a significant increase after Alaska Air Group announced its plan to acquire the company for $1.9 billion, including debt. This news had a profound impact on Hawaiian Holdings’ stock value, causing it to nearly triple in value.
The agreement between the two companies was made public on Sunday, and it immediately drew attention from investors. However, some analysts have expressed uncertainty regarding regulatory approval for the acquisition, leading to Hawaiian shares trading at $13.40, which is below Alaska’s offer price of $18 per share.
Hawaiian Holdings has faced several challenges in recent months, from the devastating Maui wildfires to high fuel costs and jet engine recall issues on some of its Airbus SE planes. As a result, the company’s shares have fallen by 52.6% this year, creating a negative price-to-earnings (PE) ratio of 1.5. In comparison, Alaska Air boasts a positive forward 12-month PE ratio of 8.2, reflecting its profitability.
The deal between Alaska and Hawaiian is valued at $929.4 million on an equity basis. Both companies have highlighted the expansion of their networks and the increased options available to passengers as the primary benefits of this acquisition. Analysts, such as TD Cowen’s Helane Becker, have praised the transaction, citing its strategic advantages for both airlines.
Alaska’s expansion into the lucrative Asia Pacific market and Hawaiian customers’ ability to travel non-stop to the U.S. mainland have been identified as key positive outcomes of the merger. The extensive network synergies that the combined entity would achieve, with minimal further investment, also contribute to the justification of the high premium associated with the deal, as explained by Craig Jenks, president of New York-based aviation consultancy Airline/Aircraft Projects.
Despite these potential benefits, regulatory resistance to the merger remains a possibility. This uncertainty is a crucial factor that investors will be monitoring closely as they assess the long-term impact of this acquisition on the airline industry.
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