Southwest Airlines (LUV
), one of the earliest discount airlines, will buy rival AirTran (AAI
) -- another sign of consolidation in an industry that has witnessed the mergers of Northwest with Delta (DAL
) and United with Continental (CAL
) over the last two years.
Southwest announced that it would make the purchase for a combination of cash and Southwest Airlines' common stock. Southwest said that at its stock closing price of $12.28
on Sept. 24,
"the transaction values AirTran common stock at $7.69
per share, or approximately $1.4 billion
in the aggregate, including AirTran's outstanding convertible notes." That is 69% above AirTran's closing price on Friday.
"Both companies have dedicated people with kindred Warrior Spirits, who care about each other, and who care about serving Customers. We will continue to build upon our outstanding Customer experiences, strong and unique Cultures, and award-winning, safe operations," said Gary C. Kelly
, chairman, president and CEO of Southwest Airlines.
The news sent AirTran shares flying nearly 65% higher in premarket trading.