Alaska Air (NYSE:ALK) has entered into a deal to acquire its rival Hawaiian Holdings (NASDAQ:HA) in an all-cash deal worth $1.9 billion. The acquisition is expected to strengthen Alaska Air’s position as the fifth-largest airline in the United States. Upon the deal’s completion, Alaska Air will have a fleet of 365 airplanes covering 138 destinations.
As per the terms, Alaska Air will maintain the distinct brand names of both airlines while operating under a unified platform. Also, Alaska Air will establish a new hub in Honolulu for flights to Asia. Finally, the combined company will be headquartered in Seattle and will be run by Alaska Air CEO Ben Minicucci.
The deal still requires regulatory approval and the consent of Hawaiian shareholders. Alaska Air expects the deal to close within the next 12-18 months.
Financial Details of the Deal
Alaska Air has agreed to pay $18 in cash for each Hawaiian share. Furthermore, the purchase price includes $900 million of Hawaii’s debt.
It is worth mentioning that the companies expect the deal to generate high single-digit earnings accretion for Alaska Air in the initial two years post-closure, with the percentage rising to the high teens after three years. Furthermore, ALK foresees achieving at least $235 million in run-rate synergies.
Is ALK a Good Stock to Buy?
Overall, Wall Street analysts have a Strong Buy consensus rating on ALK stock based on 12 unanimous Buys assigned in the past three months. Furthermore, the average ALK price target of $51.25 per share implies 29% upside potential.
