steve64

VX share price just shot up.
I went to my on-line brokerage and noticed this headline: Virgin America shares surge on report it has takeover bids from JetBlue, Alaska Air

edited to add:
Short news clip from Bloomberg: http://www.bloomberg.com/news/articles/2016-03-28/virgin-america-said-to-attract-jetblue-alaska-air-takeover-bids
There isn't too much in that small article. Snippets:
Virgin America Inc. received takeover offers from JetBlue Airways Corp. and Alaska Air Group Inc...
Discussions between Virgin America and the two bidders are ongoing, and a deal could be announced as early as next week...
It is unclear if other suitors will emerge, and Virgin America may yet decide to abandon sale negotiations in favor of remaining independent.
No comments from either of the 3 airlines

225

Article:

http://www.bloomberg.com/news/articl...-takeover-bids

eponymous_coward

LAX is a DL hub. That's competition.

Anyways, it appears events have shown that DL isn't one of the ones bidding. AS is a surprise, B6 not so much.

edcho

AS the money to do it but not sure why they would want to do it minus the possibly the assets and reduce the comp?

VX makes sense and if they had to merge, I wouldn't mind it. Of course, I didn't mind the UA/CO merger either and look how that turned out.

spin88

up 10.33% If this was initialed by B6/AS, I would expect DL to come in with an offer to allow VX to remain "independent"

Neither B6 nor AS can come up with $1.5B in cash, and in a stock swap, its hard to see how AS or B6 would push up the value of the stock more than saying independent, unless the deal watered down existing AS or B6 shareholders.

GrayAnderson

(1) Never underestimate the value of a third-party pushing an LBO. B6/AS might not have $1.5bn in cash on hand, but (to pull names out of a hat) Blackstone, Pershing Square, and a few others could easily see some logic in backing up a merger at a relatively low interest rate.
(2) Given the choices, I'd sort of prefer a DL "remain independent" bid with a non-controlling stake (and perhaps some conditions on the stake). There's a reason that, given the choice and in spite of living on the East Coast, I don't fly JetBlue. My second choice would be a merger with AS (which would, via the AS-HA relationship, sort-of bring to fruition the AS-HA-VX tie-up I've conceptually pondered at times).

3Cforme

Last year AS flew about 40 Billion available seat miles. B6 flew just over 41 Billion seat miles. VX flew just under 13 Billion seat miles. AA, DL and UA each all flew more than 240 Billion seat miles. If AS can deal with AA, UA and DL, it can handle B6+VX.

DA201

Read the article. Seems like DOT would prefer a B6 takeover, since AS and VX are pretty much direct competitors where as B6 and VX only compete on a few transcontinental routes (which already have plenty of competition). Surprised AS would want to inherit Airbus planes, given their loyalty to hometown partner Boeing. But maybe they would simply sell them or just not buy anymore and wait for the current ones to be retired.

I think B6 still makes the most sense. AS really only argument here is that they want to grow in SFO, but they honestly just want to get rid of their competitor. B6 has a better reason, as they are very small on the west coast and want to grow, and their trendy flare matches VX. Also, their fleets match up perfectly.

AS is also partnered with AA (and DL, but not as much), which gives them a huge advantage.

Snowdevil

Check your facts; AS has almost that amount in cash on-hand right now.

eponymous_coward

AS and HA don't have a relationship, other than competing very vigorously on West Coast-Hawaii. They have no partner reciprocity. What are you referring to?

Duke787

It wouldn't surprise me if AS is only interested in ensuring B6 doesn't get VX at a bargain basement price and that the price is high enough that DL doesn't become involved even for a minority stake - with little interest in actually being the final buyer.

spin88

what is show as "cash" on a balance sheet is not what you and I consider cash. (unless you are an accountant for a major company. ) And even if AS were to liquidate this "cash" and cash equivalents, it would put them in a vulnerable position. Airlines keep lots of cash as its a cyclical business.

As others noted, some type of hedge fund or wall street creten would have to loan them the $$$, or its partially a stock swap.

GrayAnderson

Something which is entirely believable. Virgin America has just under half a billion on its balance sheet (versus about $200m two years ago). Much of the long-term startup debt is also gone ($258m vs $747m two years ago, and the newer number likely includes some of the latest airliner acquisitions...fair disclosure, I don't know how an airline handles these leases on the balance sheet). Retained earnings are trending back to zero very quickly as well (they were deeply negative for a while, albeit offset by capital surplus).

My point is that there's enough cash floating around that a merger backed by perhaps a $500-750m loan and/or a mixed cash/stock deal which doesn't horridly dilute existing shareholders should be able to, no pun intended, fly. VX cash ($0.5bn) plus AS cash ($1.3bn) plus, say, $0.5-1.0bn in stock or debt should make a deal doable.

B6 isn't in as strong a position cash-wise and they've got more long-term debt as well. However, both also look to have the net income needed to cover the cost of an acquisition ($600-800m/yr should be far more than is needed to cover a merger...realistically, the combined company should be able to cover $1bn in debt with some 3-5 year notes with absolutely no trouble).

Indelaware

I wasn't aware that DL had any investment in VA, let alone a majority investment. To my knowledge the only relationships DL & VA do have is a limited joint-venture and code-sharing agreement.

DL does own a substantial share of VS, but even that investment is not a majority holding (only 49%).

So since DL doesn't own a majority of either VA or VS, just what airline is it that DL does own a majority interest? The only one that I can think of is 9E.

spin88

I think we are mixing up airline codes and stock abbreviations. Delta owns 49% of Virgin Atlantic (VS). Branson and people aligned with him own the rest. Branson owns 22% of Virgin America (VX).

So far there is no tie up between DL and VX, there is a strong tie up with VS.