Allegiant Travel Company (ALGT) is buying rival discount airline Sun Country (SNCY) in a $1.5 billion U.S. cash and stock deal.
The acquisition includes Sun Country’s $400 million U.S. debt and arrives as budget airlines across the U.S. struggle with rising costs following the Covid-19 pandemic.
Smaller budget airlines are dwarfed by the larger U.S. carriers such as American Airlines (AAL) and Delta Air Lines (DAL) that control about 70% of the domestic market.
Allegiant and Sun Country each focus on budget travelers. Sun Country also flies charters, as well as packages and shipments for e-commerce giant Amazon (AMZN).
The acquisition has an implied value of $18.89 U.S. for each Sun Country share, a premium of nearly 20% over the closing stock price of $15.77 U.S. on Jan. 9.
Once the deal is finalized, Allegiant shareholders will own 67% of the combined company and Sun Country’s shareholders will own 33%, the airlines said in a news release.
The airlines expect the deal to be approved by U.S. regulators and close in the second half of this year.
Sun Country’s stock has been flat (down 0.19%) over the last 12 months and trading at $15.77 U.S. per share.
Allegiant’s stock has declined 2% in the past year to trade at $94.97 U.S. a share.
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