The airline industry might be on the brink of its latest high-profile merger. The planned tie-up of Alaska Air Group (NYSE: ALK) and Virgin America (NASDAQ: VA) is one step closer to becoming reality, according to a recent media article. Bloomberg, citing “people familiar with the matter,” is reporting that Alaska Air is close to a settlement with the Department of Justice’s antitrust division that would clear the path for the merger.
Bloomberg’s sources said that the settlement would likely be announced by the end of this month. Neither Alaska Air Group nor Virgin America has yet commented on the report.
In April, the two companies announced a deal in which Alaska Air Group was to purchase Virgin America for $57 per share in cash. Including debt assumption and aircraft leases, the total value of the deal was estimated at $4 billion.
Justice expressed concerns that the merger would hamper competition, however, and the two carriers agreed to give the government more time to review the transaction. Additionally, representatives of the airlines met with top officials in Justice’s antitrust division in September to discuss the matter, according to Bloomberg.
Investors seem very optimistic that the deal will ultimately receive Justice’s approval. Although Virgin America’s share price dipped in September — perhaps on concern that those talks would not be productive — it has recovered in recent weeks. At the moment, the stock is changing hands at around $56.50 per share, very close to the price agreed in the deal.
When the transaction was originally announced, Alaska Air Group predicted that it would be accretive to its adjusted earnings in the first full year of realization.
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Eric Volkman has no position in any stocks mentioned.
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