Alaska Air Group, Inc. ALK took a deep dive of over 15% in early trading on Monday following its acquisition deal with Hawaiian Holdings, Inc. HA.
The deal, expected to take 12 to 18 months to finalize, has raised concerns about its potential impact on investor sentiment, according to analysis from Raymond James.
Savanthi Syth, the analyst at Alaska Air Group, downgraded the company’s rating from Strong Buy to Market Perform and eliminated the price target.
At $18 per share, the acquisition deal represents a whopping 270% premium to the closing price of Hawaiian Holdings shares on Friday, as highlighted in the downgrade note by Syth.
Alaska Air Group aims to clinch a leading position in the more than $8 billion Hawaii market through the deal, the analyst noted. Despite being well-positioned to pursue the acquisition and anticipated benefits to its loyalty program and credit card offering, the company’s prospects are dampened in the short to medium term due to the complexity of executing the merger and current macroeconomic uncertainty, as written in the downgrade.
“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,” said Syth.
Shares of Alaska Air Group plummeted by 15.1% to $33.77 at the time of publication on Monday.