Southwest will acquire Air Tran for $1.4 Billion

Southwest Airlines on Monday morning announced an agreement to acquire Orlando-based AirTran Airways for $1.4 billion in cash and Southwest common stock in a deal that brings together the world's largest LCC with the third largest LCC in North America.

Under the terms of the transaction, each share of AirTran common stock will be exchanged for $3.75 in cash and 0.321 shares of SWA common stock, subject to certain adjustments. The deal values AirTran stock at $7.69 per share, which SWA said was a premium of 69% over the Sept. 24 closing price. "Including the existing AirTran net indebtedness and capitalized aircraft operating leases," SWA said the transaction value is approximately $3.4 billion.

The agreement has been cleared by both companies' boards of directors and is subject to the approval of AirTran stockholders, as well as clearance by the US Dept. of Justice, which recently approved the merger of United Airlines and Continental Airlines. "There is very little overlap—only 19 overlapping round trip flights," SWA Chairman, President and CEO Gary Kelly said during a press conference. "We think that we've got a compelling case to clear the merger."

READ MORE:    ATW