Allegiant Buys Sun Country in $1.5B Deal

Allegiant Travel Co. (ALGT) agreed to purchase Sun Country Airlines (SNCY) through a cash and stock deal that values the Minneapolis-based airline at roughly $1.5 billion, including net debt, as mergers persist among U.S. leisure-oriented airlines.

According to the final agreement announced on Monday, Sun Country shareholders will get 0.1557 shares of Allegiant common stock along with $4.10 in cash for every share they hold, which equates to a value of $18.89 per share. The offer indicates a 19.8% increase over Sun Country’s (SNCY) closing value of $15.77 on January 9.

Allegiant (ALGT) closed at $94.97 on Friday, resulting in a market value of $1.68 billion for the company.

Upon completion of the transaction, Allegiant (ALGT) shareholders are anticipated to hold approximately 67% of the merged company on a fully diluted basis, with Sun Country shareholders owning the remaining 33%.

Gregory C. Anderson, CEO of Allegiant, stated that the agreement leverages the commonalities in the operational approaches of the two airlines.

In his prepared remarks, he stated, ‘Our combined networks will increase our access to a wider range of vacation spots, including foreign locations.’

President and CEO of Sun Country, Jude Bricker, stated that the deal provides benefits for shareholders and enables the airline to maintain its expansion plans.

“This deal provides substantial value for Sun Country shareholders and offers a chance to continue reaping the benefits of our growth strategies as a unified company,” he stated in the announcement.

Strategic rationale and synergies

The combination unites two airlines that specialize in vacation travel, charter flights, and additional revenue streams. Allegiant anticipates achieving $140 million in yearly savings within three years, fueled by improved network planning, better use of aircraft, and cost reductions in purchasing. The deal is projected to boost earnings per share one year following the completion, as stated by the company.

The merged airline would manage approximately 195 planes, along with more aircraft currently on order and under option. Sun Country’sSNCY) freight and charter services, including its long-term contract with Amazon Prime Air, would provide variety to Allegiant’s (ALGT) primarily focused on leisure-related commercial activities.

Operations and governance

Allegiant (ALGT) will stay as the publicly traded parent company, and both airlines will keep running independently until a unified operating certificate is granted by the Federal Aviation Administration. There won’t be any immediate changes to branding, schedules, or ticketing.

After the closing, Anderson will continue as chief executive of the merged company. Bricker will join Allegiant’s (ALGT) board and act as a consultant throughout the integration process. The merged company will have its headquarters in Las Vegas, while continuing to maintain a substantial operational base in Minneapolis-St. Paul.

The deal is still dependent on regulatory clearances and standard closing requirements.