O’Melveny and Wilson Sonsini check in for Alaska Air’s $1.9bn acquisition of Hawaiian

O’Melveny advises Alaska as Wilson Sonsini reps Hawaiian in deal likely to attract regulatory scrutiny

O’Melveny & Myers and Wilson Sonsini Goodrich & Rosati have been called in for Alaska Airlines’ $1.9bn acquisition of rival Hawaiian Airlines. 

O’Melveny is advising longtime client Alaska while Wilson Sonsini is acting for Hawaiian. 

The companies said on Sunday (3 December) that the deal would solidify Alaska’s position as the fifth-largest carrier in the US, where repeated acquisitions have led to four carriers – American Airlines, Delta Air Lines, Southwest Airlines and United Airlines – dominating the domestic market. 

The deal could, however, lead to a clash with US regulators, which are resistant to further consolidation in the industry out of fears it could push up airfares. The US Department of Justice (DOJ) is currently challenging JetBlue’s proposed $3.8bn acquisition of Spirit Airlines, while earlier this year the DOJ also won a lawsuit that blocked a partnership between JetBlue and American Airlines. 

Alaska has agreed to buy Hawaiian for $18 per share in cash in a deal that includes around $900m of its debt. The offer is a significant premium on Hawaiian’s Friday closing price of $4.86 and reflects the hammering the company’s shares have taken in the past year after engine recall issues and soaring fuel costs contributed to it reporting heavy losses after a sustained period of profitability. 

Alaska noted that the deal valued Hawaiian at 0.7 times its annual revenue, which it said was “approximately one third the average of recent airline transactions”. It added that it anticipated at least $235m in annual savings. 

The Wilson Sonsini team working on the deal includes corporate and M&A partners Tony Jeffries, Marty Korman, Doug Schnell, Amanda Urquiza and Remi Korenblit. 

Other partners in the team include Beau Buffier (antitrust and competition), Christopher Paniewski (technology transactions), Dave Thomas (employee benefits and compensation), Matt Staples (privacy and cybersecurity), Greg Broome (tax), Marina Tsatalis (employment), Susan Reinstra (real estate), Kathleen Rothman and Michael Rosati (both corporate finance), and Joshua Gruenspecht and Josephine Aiello LeBeau (both regulatory). 

Meantime O’Melveny’s team includes M&A partners Andy Terner and Nikole Kingston alongside partners Courtney Dyer (regulatory), Bob Siegel and Chris Hollinger (both labour), Shelly Heyduk (SEC reporting), Jeff Walbridge (executive compensation), Jennifer Taylor (finance), Andy Dolak (IP), John Rousakis (environmental) and Bob Fisher (tax). 

O’Melveny has represented Alaska on previous deals, including its $4bn acquisition of Virgin America in 2016. Virgin was repped by Latham & Watkins. 

Alaska, which is valued at around $5.1bn, said the Hawaiian acquisition would give it “a stronger platform for growth and competition in the US”. The company expects the deal to generate high single-digit earnings gains within the first two years, with no material impact on long-term balance sheet metrics. 

Alaska CEO Ben Minicucci also said in a conference call with investors that it would make the company the “clear leader” in the $8bn Hawaiian market, according to a report in AP

The deal is expected to complete in the next 12 to 18 months. Minicucci will lead the combined company, which will be based in Seattle. Alaska said the brands of both airlines would be maintained post acquisition. 

BofA Securities and PJT Partners are serving as financial advisors to Alaska Airlines while Barclays is financial advisor to Hawaiian.

Meanwhile, closing arguments are due to be heard this week in JetBlue’s antitrust trial in the US District Court in Boston. Shearman & Sterling advised JetBlue on its proposed acquisition of Spirit Airlines, advised by White & Case, and was subsequently appointed lead counsel for JetBlue for its antitrust suit with the DoJ, according to Bloomberg Law

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