Virgin Amer­ica gets takeover bids from Jet­Blue and Alaska Air

The Pak Banker - - COMPANIES/BOSS -

NEW YORK: Virgin Amer­ica Inc. re­ceived takeover of­fers from Jet­Blue Air­ways Corp. and Alaska Air Group Inc. af­ter the car­rier backed by bil­lion­aire Richard Bran­son put it­self up for sale, ac­cord­ing to peo­ple familiar with the mat­ter. Dis­cus­sions be­tween Virgin Amer­ica and the two bid­ders are on­go­ing, and a deal could be an­nounced as early as next week, the peo­ple said, ask­ing not to be iden­ti­fied dis­cussing pri­vate in­for­ma­tion. It is un­clear if other suit­ors will emerge, and Virgin Amer­ica may yet de­cide to aban­don sale ne­go­ti­a­tions in fa­vor of re­main­ing in­de­pen­dent.

Last week, Bloomberg re­ported that the car­rier, which flies to des­ti­na­tions through­out the U.S. and Mex­ico, was work­ing with fi­nan­cial ad­vis­ers on a sale af­ter re­ceiv­ing takeover in­ter­est. Virgin Amer­ica's stock has been up al­most 10 per­cent since then, giv­ing it a mar­ket cap­i­tal­iza­tion of $1.3 bil­lion. Virgin Amer­ica shares jumped as much as 15 per­cent, and closed up 10 per­cent at $37.70 Mon­day. Jet­Blue gained 2.7 per­cent to $20.79, while Alaska in­creased 1.1 per­cent to $81.49. "If the com­pany were to sell it­self, Jet­Blue would make the most sense from an air­craft, net­work and prod­uct of­fer­ing per­spec­tive," He­lane Becker, a Cowen & Co. an­a­lyst said in a re­port Mon­day.

Ac­quir­ing Virgin Amer­ica would give Jet­Blue a larger pres­ence on the U.S. West Coast, in­clud­ing in Los An­ge­les and San Fran­cisco, and would elim­i­nate a com­peti­tor for busi­ness trav­el­ers on lu­cra­tive cross-coun­try routes. Strength in the west­ern part of the coun­try would com­ple­ment Jet­Blue's ma­jor pres­ence in New York and net­work along the U.S. East Coast and in the Caribbean. Both air­lines op­er­ate Air­bus Group SE air­craft.

Alaska would elim­i­nate a West Coast ri­val by buy­ing Virgin Amer­ica and would ex­pand its route net­work in Mex­ico. Alaska pri­mar­ily flies Boe­ing Co. planes.

Bran­son is the founder of the Virgin Group, which also owns stakes in gyms, ho­tels and telecom­mu­ni­ca­tions com­pa­nies around the world. Virgin Amer­ica started fly­ing from San Fran­cisco in 2007.

Virgin Amer­ica last month re­ported 2015 ad­justed earn­ings of $201.5 mil­lion, the most in the com­pany's his­tory. The air­line re­ceived five new Air­bus A320 air­craft last year, with plans for five more this year, af­ter slow­ing growth in 2012 to fo­cus on long-term sur­vival. It ex­pects to grow ca­pac­ity by 10 per­cent a year in 2017 and 2018.

Virgin Amer­ica is 54 per­cent owned by Bran­son's fund, VX Hold­ings, and Cyrus Cap­i­tal Part­ners, Becker said in the re­port. "The large share­hold­ers could be seek­ing to mon­e­tize their in­vest­ment with a sale to an­other in­vestor or a par­tial sale to a for­eign air­line/com­pany that would have a code­shar­ing agree­ment at­tached to it," she said.

Virgin Amer­ica, based in Burlingame, Cal­i­for­nia, sold stock in a $353 mil­lion ini­tial pub­lic of­fer­ing less than 18 months ago, pric­ing its shares at $23 apiece, data com­piled by Bloomberg show. Alaska spokes­woman Bob­bie Egan said the com­pany doesn't com­ment on ru­mors or spec­u­la­tion. Jet­Blue spokesman Doug McGraw said the car­rier had the same pol­icy. Virgin Amer­ica didn't re­turn phone calls seek­ing com­ment.

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