Alaska Airlines has bested JetBlue Airways Corporation (NASDAQ:JBLU) in a bidding war for ownership of Virgin America Inc (NASDAQ:VA).
Virgin's shares soared 40% to $54.53 as the board agreed to recommend a $57 a share offer from Alaska that values Virgin Air at $2.6bn.
According to the Wall Street Journal, the Virgin board decided to get into bed with Alaska partly because of its stronger balance sheet, which would make it easier for it to raise funds to finance the acquisition.
Seattle-based Alaska Airlines said the deal, if it goes through – it still needs to be cleared by the authorities – should boost its annual revenue by around 27%, and would be earnings-enhancing in the first year of ownership.
In terms of passengers carried, the addition of Virgin to the Alaska business would see it become the fifth largest US airline, leapfrogging JetBlue.
The two airlines have just six routes that overlap so the networks are highly complementary.
The merger will be the first amalgamation of US airlines since US Airways and American Airlines combined in 2013.