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Alaska Air agreed to pay $18 per share in cash. The transaction value incorporates $0.9 billion of net debt held by Hawaiian Airlines.
The companies anticipate approximately $235 million in expected run-rate synergies, representing a conservative estimate of the transaction’s synergy potential.
The acquisition is anticipated to close within the next 12-18 months.
Analysts highlight the strategic rationale of the deal, emphasizing that it provides Alaska Air with international exposure and access to the Oneworld airline alliance.
Despite the perceived benefits, analysts also caution that the deal may encounter regulatory resistance, citing the opposition faced by JetBlue’s proposed merger with Spirit Airlines.
As a result, shares in Alaska Air fell about 9% in pre-market Monday trade.
“We think this combination makes a lot of sense, and it should be approved,” analysts at TD Cowen wrote in a note.
Analysts at Raymond James double downgraded Alaska Air stock to Market Perform from Strong Buy following the announcement.
“Admittedly, with the acquisition unlikely to close for 12-18 months, the earnings recovery outlook that supported our prior view is intact, with the only likely change a delay in resuming a dividend. Moreover, we believe this acquisition makes sense longer term and Alaska has the balance sheet and earnings strength to see it through,” they said.
“However, given the current macro uncertainty, the complexity of executing the merger should weigh on sentiment and likely limits the near- to medium-term upside case.”
Analysts at Deutsche Bank also downgraded ALK shares, while upgrading their recommendation on Hawaiian stock.
