SIR RICHARD Branson says he is sorry to bid farewell to Virgin America, an airline that he helped found in 2004. But as a shareholder with a 18% voting stake in the firm, he will not really be maudlin. Alaska Airlines is paying $2.6 billion to buy 100% of the equity of the airline, after a high-altitude bidding war with JetBlue, a rival. It is also taking on the airline’s debt and leases, bringing the total pricetag to $4 billion. The new carrier will become America’s fifth-largest.
Alaska is betting that Virgin America, with bases in Los Angeles and San Francisco, will complement its strongholds in Seattle, Portland and Anchorage, solidifying its presence on the west coast. It will also gain Virgin America’s east coast slots, in New York and Washington, DC, where Alaska has struggled to gain access. Still, the price is steep, says Loizos Heracleous of Warwick Business School in Britain. Alaska will pay $57 for each of Virgin’s shares. They have been trading between $26 and $38 over the past year. Brad Tilden, Alaska’s boss, says that the tie-up could result in $225m of annual cost savings and revenue benefits. Acquisitions are often...Continue reading
Source: Business and finance http://ift.tt/238RBgI
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