Allegiant to buy Sun Country in $1.5 billion cash and stock deal

Serious travel It said on Sunday it was acquiring a fellow leisure airline Land of the sun In a cash-and-stock deal valued at $1.5 billion, including debt, a plan comes as U.S. budget airlines face rising costs in the wake of the pandemic and a surge in domestic capacity.

“Our two complementary airlines will create a leading, more competitive, leisure-focused airline in the United States,” Allegiant CEO Greg Anderson said in an interview.

Smaller, leisure-focused airlines are dwarfed by larger competitors Delta Airlines, American Airlines, United Airlines and Southwest Airlineswhich together had nearly 70% of the U.S. domestic market share in the 12 months ended Oct. 31, according to federal data.

Both Las Vegas-based Allegiant and Minneapolis-based Sun Country focus on budget travelers, while Sun Country also flies charter flights, as well as travel packages Amazona business that Anderson said was crucial to the deal. He said airline CEOs had previously discussed the proposed merger with Amazon.

Allegiant said the deal has an implied value of $18.89 per Sun Country share, a premium of nearly 20% over Sun Country’s closing stock price of $15.77 on Friday.

Allegiant shareholders will own about 67% of the combined company while Sun Country shareholders will own about 33%, the airlines said. The deal includes $400 million of Sun Country’s net debt.

Both Sun Country and Allegiant focus on vacations, especially sun, beach and other entertainment destinations.

The deal will test the Trump administration’s appetite for airline mergers.

Allegiant’s Anderson expressed confidence in the agreement being approved, noting that the two companies have little network overlap. The airlines expect to complete the deal in the second half of this year.

Allegiant approached Sun Country in late fall, Anderson said. If the deal is approved by regulators, Anderson will become CEO of the combined airline. Sun Country CEO Jude Bricker, former chief operating officer of Allegiant, will join Allegiant’s board of directors.

She challenged the Biden administration JetBlue Airlines The acquisition of Spirit Airlines, which is now in its second bankruptcy in less than a year and struggling to survive. A federal judge sided with Biden’s Justice Department and blocked the JetBlue-Spirit deal on antitrust grounds two years ago. The JetBlue deal upended an earlier 2022 merger between Spirit and… Frontier Airlines.

Leaders of Spirit and Frontier engaged in frequent discussions over the following years, and airline analysts continue to point to combining them as a possibility.

But the Biden administration was clear Alaska Airlines Acquisition of Hawaiian Airlines for approximately $2 billion in 2024.

Allegiant and Sun Country executives will hold a special conference call Monday at 8:30 a.m. ET to discuss their deal.