Southwest Airlines closed on its purchase of all of the outstanding common stock of AirTran Holdings, the former parent company of AirTran Airways. Each share of AirTran common stock will be exchanged for USD3.75 in cash and 0.321 shares of Southwest Airlines' common stock. Southwest shares finished 1.2% lower on Monday.
AirTran stockholders are expected to receive 44 million shares of Southwest Airlines common stock, which will represent 5.6% of the Southwest Airlines common shares outstanding. AirTran stockholders will also receive USD518 million in cash. Including the existing AirTran net indebtedness (including outstanding convertible notes) and capitalised aircraft operating leases, the total transaction value is USD3.2 billion.
The new Southwest has a combined market capitalisation of USD9.8 billion. The acquisition is expected to produce annual benefits exceeding USD400 million by 2013, with one-time costs of about USD500 million expected.
AirTran will continue to operate under the AirTran brand with its same policies, procedures, and product features for a unspecified period of time. Southwest plans to integrate AirTran into Southwest Airlines over time by transitioning the AirTran fleet to the Southwest Airlines livery, developing a consistent customer experience, and transitioning the operations of the two carriers onto a Single Operating Certificate, expected by 1Q2012.
Selected Americas airline share price movements (% change): 02-May-2011