Dec 4 (Portal) – Shares of Hawaiian Holdings (HA.O), the parent company of Hawaiian Airlines, nearly tripled on Monday after Alaska Air Group (ALK.N) agreed to a takeover for $1.9 billion dollars, including debt, had agreed to.
Hawaiian shares were trading at $13.40 in morning trading, below Alaska’s published offer price of $18 a share on Sunday, with some analysts saying regulatory approval was far from certain.
The company’s shares had taken a hit in recent months due to the impact of the Maui wildfires, high fuel costs and problems with the recall of engines on some of its Airbus SE aircraft (AIR.PA). Its shares are down 52.6% so far this year.
Hawaiian Holdings shares underperformed its peers last year
According to LSEG, Hawaiian currently has a negative price-to-earnings (P/E) ratio of 1.5, reflecting losses, compared to a positive 12-month P/E ratio of 8.2 for Alaska Air.
Hawaiian Holdings hasn’t reported adjusted profit in three years
Hawaiian Airlines aircraft sit idle on the runway at Daniel K. Inouye International Airport due to the business downturn caused by the coronavirus disease (COVID-19) in Honolulu, Hawaii, United States, April 28, 2020. Picture taken April 28, 2020. Portal /Marco Garcia/File Photo Purchase LICENSE RIGHTS
Alaska and Hawaiian said Sunday that the deal, valued at $929.4 million on an equity basis, will expand their network and give passengers more choice.
“This transaction makes sense for both airlines,” TD Cowen analyst Helane Becker wrote in a note.
The deal will allow Alaska to grow in the lucrative Asia-Pacific market while allowing Hawaiian customers to travel nonstop to the U.S. mainland, Becker added.
“The deal’s high premium is justified by the extensive network synergies the combined company could achieve with minimal further investment,” said Craig Jenks, president of New York-based aviation consulting firm Airline/Aircraft Projects, referring to the 270% premium.
However, there is a possibility that there will be regulatory resistance to the merger. Under the hawkish Biden administration, the U.S. Justice Department filed a lawsuit in March to stop JetBlue from buying Spirit Airlines (SAVE.N), saying the proposed merger would “put travel out of reach for many cost-conscious travelers.”
JetBlue shares pared losses to trade flat premarket, while Spirit shares rose 6.5% on Monday.
Shares of Seattle-based Alaska Air fell 17.6%.
Reporting by Ananta Agarwal and Shivansh Tiwary in Bengaluru; Edited by Krishna Chandra Eluri and Shinjini Ganguli
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