In a dramatic turn of events, Alaska Air (NYSE:ALK) dropped a financial bombshell on Sunday by announcing its agreement to acquire Hawaiian Airlines (HA) for $18 per share in cash, catapulting the total value of the transaction to around $1.9 billion, inclusive of debt.
The companies ecstatically highlighted that the merging of their complementary domestic, international, and cargo networks would unleash ferocious competition and significantly broaden the spectrum of choices for consumers on the U.S. west coast and the Hawaiian Islands.
Revealing a tantalizing glimpse of the future, Alaska Air (ALK) declared that it foresees $235 million in anticipated run-rate synergies, illustrating a conservative estimate of the deal’s synergy potential.
With an air of unbridled optimism, the company also laid bare its anticipation of the deal yielding high single-digit earnings accretion within the initial two years and soaring to the high teens thereafter. As if that was not enough, it projected a mid-teens return on investment capital by year three, excluding integration costs, with returns surpassing Alaska Airlines’ (ALK) cost of capital.