Southwest Airlines is to acquire AirTran Holdings, Inc., the parent company of AirTran Airways, for $1.4 billion in a combination of cash and shares.
Each share of AirTran common stock will be exchanged for $3.75 in cash and 0.321 shares of Southwest Airlines' common stock, subject to certain adjustments. Including the existing AirTran net indebtedness and capitalized aircraft operating leases, the transaction value is approximately $3.4 billion.
The agreement has been unanimously approved by the boards of directors of each company, and closing is subject to the approval of AirTran stockholders, receipt of certain regulatory clearances, and fulfillment of customary closing conditions.
"Today is an exciting day for our employees, our customers, the communities we serve, and our shareholders," said Gary C. Kelly, chairman, president, and CEO of Southwest Airlines. "As we approach our 40th anniversary of providing exceptional customer service at everyday low fares, the acquisition of AirTran represents a unique opportunity to grow Southwest Airlines' presence in key markets we don't yet serve and takes a significant step towards positioning us for future growth.”
The acquisition will expand Southwest Airlines' network into Atlanta, the busiest airport in the US, as well as Washington, DC via Ronald Reagan National Airport, New York LaGuardia, Boston Logan, and Baltimore/Washington, as well as providing access to leisure markets in the Caribbean and Mexico.
AirTran revenues and operating income, excluding special items, for the twelve months ending June 30, 2010, were $2.5 billion and $128 million, respectively. Southwest Airlines revenues and operating income, excluding special items, for the same period were $11.2 billion and $843 million, respectively.
Southwest Airlines intends to fund approximately $670 million in cash consideration for the transaction out of cash on hand.
Based on current operations, the combined organization would have nearly 43,000 employees and serve more than 100 million customers annually from more than 100 different airports in the US and near-international destinations.
The transaction is expected to close by the first half of 2011. Commercial and operating integration is slated to culminate in 2012, with both carriers operating under Southwest Airlines' Federal Aviation Administration operating certificate in Dallas.
