Monday, October 5, 2015         

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Alaska Air is a hot target for takeover, analysts say

By Brooke Sutherland and Mary Schlangenstein

Bloomberg News


Alaska Air Group Inc. (which flies more than a fifth of its routes to Hawaii) may lure takeover interest from Delta Air Lines Inc. with its Seattle hub and ability to generate more profit from its assets than most carriers.

The smallest of the six remaining major U.S. airlines after the US Airways Group Inc.-AMR Corp. merger closed Dec. 9, Alaska stands out as a well-run company with an appealing West Coast route network, said shareholder Diamond Hill Capital Management Inc. The $4.9 billion company, which has been profitable since 2009, offers suitors one of the industry's most fuel-efficient fleets and a return on assets that's higher than 88 percent of global airlines, according to data compiled by Bloomberg.

Delta may want to buy Alaska to ferry additional U.S. passengers to Seattle for international flights the carrier is adding there, said Imperial Capital LLC. Even after surging 64 percent this year, Alaska would be a bargain for a buyer, said James Investment Research Inc. Net income is on pace to hit a record in 2013, and the company is more affordable relative to its profit than 82 percent of peers, data compiled by Bloomberg show.

Acquirers "like to find those bargain kind of companies that are profitable," David James, director of research at Alpha, Ohio-based James Investment, said in a phone interview. "I could see one of the bigger ones looking to take them over. It's got a really good niche market within Alaska and then some other key parts within the continental United States and Canada."

Alaska Chief Financial Officer Brandon Pedersen said that for many years the airline's preference has been to remain a strong, vibrant, independent company.

"We think our current plan provides the best outcome for all of our stakeholders -- including employees, customers and shareholders," Pederson said by email in response to questions about a possible takeover.

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