Why Sun Country Airlines Stock Climbed Today
Key Points
Travel company Allegiant wants to buy Sun Country.
Combining with a fellow budget airline could create a more profitable business.
- 10 stocks we like better than Sun Country Airlines ›
Shares of Sun Country Airlines (NASDAQ: SNCY) jumped on Monday after the low-cost carrier struck a deal to be acquired by rival Allegiant (NASDAQ: ALGT) for roughly $1.5 billion.
By the close of trading, Sun Country's stock price was up more than 10%.
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Image source: Allegiant and Sun Country Airlines.
An enticing offer for Sun Country's shareowners
Under the terms of the agreement, Allegiant would purchase Sun Country for $18.89 per share in cash and stock. That amounts to a nearly 20% premium to Sun Country's closing price on Friday.
Sun Country's investors would receive $4.10 in cash and 0.1557 shares of Allegiant stock for each Sun Country share they own.
"We believe this transaction delivers significant value to Sun Country shareholders and an opportunity to continue to benefit from our growth plans as a combined company," Sun Country CEO Jude Bricker said in a press release.
The deal is projected to close in the second half of this year, subject to shareholder and regulatory approval.
Stronger together than apart
The merger would bring together two profitable, leisure travel-focused airlines serving a combined 22 million customers annually across almost 175 cities, via 650 routes and 195 aircraft. The two companies' route networks are largely complementary. Sun Country would help Allegiant expand internationally across Canada, Mexico, Central America, and the Caribbean.
The combination is expected to result in a more diversified, efficient, and financially sound business. Management sees $140 million in potential annual cost synergies by the third year following the acquisition's completion, with the deal adding to Allegiant's earnings per share as soon as one year post-closing.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Allegiant Travel. The Motley Fool has a disclosure policy.
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