AirTran Airways Holdings, the parent of AirTran Airways (Orlando) was formally acquired today (May 2) by Southwest Airlines.
Based on the average of Southwest Airlines’ closing prices for the 20 trading days ending three trading days prior to May 2, 2011, of $11.90, the transaction values AirTran common stock at approximately $7.57 per share, or $1.0 billion in the aggregate, excluding shares issuable upon conversion of AirTran’s outstanding convertible notes. Each share of AirTran common stock will be exchanged for $3.75 in cash and 0.321 shares of Southwest Airlines’ common stock. Assuming no conversion of AirTran’s outstanding convertible notes, AirTran stockholders will receive 44 million shares of Southwest Airlines common stock, which will represent 5.6 percent of the Southwest Airlines common shares outstanding. Additionally, they will receive cash of $518 million. Including the existing AirTran net indebtedness (including outstanding convertible notes) and capitalized aircraft operating leases, the total transaction value is $3.2 billion.
The transaction, including the anticipated benefit of net synergies, but excluding the impact of one-time acquisition and integration costs, is expected to be accretive to Southwest Airlines pro forma fully-diluted earnings per share in the first twelve months after today’s close and strongly accretive upon full realization of net synergies. Net annual synergies are estimated to exceed $400 million by 2013. One-time costs related to the acquisition and integration of AirTran are currently estimated to be approximately $500 million.
AirTran revenues and operating income for the twelve months ending December 31, 2010, were $2.6 billion and $128 million, respectively. Southwest Airlines revenues and operating income for the twelve months ending December 31, 2010, were $12.1 billion and $988 million, respectively. As of March 31, 2011, the combined unrestricted cash and short-term investments of the two companies was approximately $5.0 billion. Southwest’s funding for the transaction will be from its cash on hand. In addition, Southwest Airlines has a fully available, unsecured revolving credit facility of $800 million.
Bob Jordan, Southwest’s Executive Vice President of Strategy and Planning, will serve as President of AirTran effective today. Bob Fornaro, who has served as Chairman, President, and CEO at AirTran, will move to a new key role today as a full-time consultant for the integration of the two airlines, working closely with Kelly and Jordan to ensure a smooth transition. As previously announced, Southwest Airlines’ headquarters will remain in Dallas, with plans for AirTran’s operations and presence in both Orlando and Atlanta still under review.
Until a Single Operating Certificate (SOC) is secured from the Federal Aviation Administration (FAA), AirTran operational departments will continue operating under the AirTran operating certificate (AOC).
AirTran will now operate as a separate airline until the two airlines can be finally merged under one AOC.
On May 2ย Kelly, Jordan, Fornaro, and leaders from both airlines will host celebratory events in all mainland locations for both Southwest and AirTran.
Following the closing, the three executives departed Southwest’sDallasย headquarters forย Atlanta, AirTran’s largest Crew Member (employee) location, onboard an AirTran’s Boeing 737-7BD N353AT (msn 36724). N353AT carries a special Southwest-AirTran sticker.
The team will host an afternoon event for Employees at AirTran’s maintenance hangar there. The event will be webcast live for Employees and watched in such locations asย Baltimore/Washington,ย Milwaukee, andย Orlando, where the carriers each have a significant presence.
Copyright Photo: Tony Storck. Please click on photo for additional information.
AirTran Slide Show: CLICK HERE
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