Alaska Air Group Inc. will buy Virgin America Inc. for US$2.6 billion in cash to become the top carrier on the US West Coast and compete more effectively with larger airlines, Reuters reports.
At US$57 a share, the deal represents a premium of about 86 percent from Virgin America’s stock price before reports in March that the company was considering a sale.
The deal appears to end what Alaska Air chief executive Brad Tilden called a “hard-fought competition” to buy the offshoot of billionaire Richard Branson’s London-based Virgin Group, which had become famous for its mood lighting and media-rich entertainment on flights.
JetBlue Airways Corp. had also made an offer but said in a statement that the price reached a point where it decided to withdraw from the bidding.
The Alaska Air deal will create the fifth-largest US airline, after a decade of mergers that have shrunk the industry to a handful of companies.
The top four control more than 80 percent of the US travel market.
Virgin America accounts for about 1.5 percent of US domestic flight capacity, while Alaska Air and its Horizon Air subsidiary account for 5 percent, Deutsche Bank analyst Michael Linenberg wrote in a recent research note.
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