Alaska Air Group to acquire Virgin America

Alaska Airlines and Virgin America intend to merge, creating a new West Coast airline, the companies said.

Alaska Air Group, Inc. (NYSE: ALK) and Virgin America, Inc. (NASDAQ: VA) boards of directors have unanimously approved a definitive merger agreement, under which Alaska Air Group will acquire Virgin America for USD57.00 per share in cash.

Including existing Virgin America indebtedness and capitalized aircraft operating leases, the aggregate transaction value is approximately USD4.0 billion. With an expanded West Coast presence, a larger customer base, and an enhanced platform for growth, Alaska Airlines will be positioned to provide more choices for customers, increase competition and deliver attractive returns to investors.

The combination expands Alaska Airlines´ existing footprint in California, bolsters its platform for growth and strengthens the company as a competitor to the four largest US airlines. Combining Alaska Airlines´ well-established core markets in the Pacific Northwest and the state of Alaska with Virgin America´s strong foundation in California will make Alaska Airlines the go-to airline for the more than 175,000 daily fliers in and out of Golden State airports, including San Francisco and Los Angeles.

For Virgin America customers, service will expand in the thriving technology markets in Silicon Valley and Seattle. The combined airline will also offer more frequent connections to international airline partners departing Seattle, San Francisco and Los Angeles. In addition, this transaction will open up growth opportunities in important East Coast business markets by increasing Alaska Airlines´ access to slot-controlled airports like Ronald Reagan Washington National Airport and the two primary New York City-area airports, John F. Kennedy International Airport and LaGuardia Airport.

BofA Merrill Lynch and UBS Investment Bank acted as lead financial advisors to Alaska Airlines on the transaction. Cowen & company also acted as a financial advisor to the company. Evercore Group LLC acted as financial advisors to Virgin America. O´Melveny & Myers LLP acted as legal advisors to Alaska Airlines, and Latham & Watkins LLP acted as legal advisors to Virgin America.

Alaska Airlines, a subsidiary of Alaska Air Group (NYSE: ALK), together with its partner regional airlines, serves more than 100 cities through an expansive network in Alaska, the Lower 48, Hawaii, Canada, Costa Rica and Mexico.

Known for its mood-lit cabins, three beautifully designed classes of service and innovative fleetwide amenities — like touch-screen personal entertainment, WiFi and power outlets at every seat, Virgin America has earned a host of awards since launching in 2007.