Justice Department Gets More Time to Study Alaska Air, Virgin America Merger
September 23 2016 - 2:10PM
Dow Jones News
Alaska Air Group Inc. said Friday that it agreed to give the
U.S. Justice Department "some additional time" to complete its
antitrust review of the carrier's planned merger with Virgin
America Inc. But the carrier also said it is "confident" it will
address any regulatory concerns and is "sticking to our timeline of
closing" early in the fourth quarter.
The Seattle-based parent of Alaska Airlines declined to say how
much more time.
The Justice Department declined to comment Friday.
Alaska in early April announced a $2.6 billion offer to acquire
Virgin America. The two carriers in mid-May received a request for
more information about the deal from federal antitrust regulators.
As part of that commonplace "second request" for information, the
two airlines agreed not to close their deal before Sept. 30.
In recent weeks, the carriers have said they were making good
progress on fulfilling the request for more information and said
they were confident they would be able to close early in the fourth
quarter. San Francisco-based Virgin America in August sent to
California warning under the Worker Adjustment and Retraining
Notification Act that about 225 Virgin America back-office workers,
about 8% of the total workforce, likely will be laid off if the
deal closes, with reductions beginning Oct. 11 and running through
June of next year.
News of the delay in closing was first reported Friday by
Bloomberg. A day earlier, Bloomberg raised the possibility that the
Justice Department might have concerns that the transaction would
be a risk to competition, citing a meeting the week before with the
chief of the department's antitrust division and other
officials.
Alaska said Friday that "we continue to be on track to close"
early in the fourth quarter. It said the regulatory review "is
progressing as expected."
Morgan Stanley, in a research note Friday, said as the timeline
winds down to a Justice Department decision, "investors have become
increasingly concerned about the risk to approval. "Risk still
seems low as (Alaska) anticipates a smooth process and the deal
appears consumer-friendly," Morgan Stanley said. Deal or no deal,
the firm said, it continues to view Alaska "as well positioned,"
and it reiterated its buy rating.
A postponement of the "timing agreement," the date before which
the parties agree not to close their transaction, can easily be
done, should the Justice Department feel the second request for
information isn't fulfilled or if the government wants to broach
possible concessions the two companies should make to win
clearance.
The combination of Seattle-based Alaska Air Group and Virgin
America would create the No. 5 U.S. airline by traffic, eclipsing
JetBlue Airways Corp., which currently holds that spot. But the
combined company, with only six routes that overlap, still would be
very small compared with the largest four U.S. airlines, all
expended by recent mergers, that control more than 80% of domestic
capacity.
Alaska shares were down 0.3% at $65.82 and Virgin America shares
were about flat at $53.21 on Friday, after tumbling Thursday.
Write to Susan Carey at susan.carey@wsj.com
(END) Dow Jones Newswires
September 23, 2016 14:55 ET (18:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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