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Alaska Air: Circling Over The America West Deal

A third airline may yet join the America West Holdings-US Airways (UAIRQ) party. On May 19, the two airlines announced final plans to merge and form a new company of which America West (AWA) shareholders would own 45%. Analysts put the value of the deal at $6 per America West share. Now some pros close to the industry say Alaska Air Holdings (ALK), which owns Alaska Airlines, may make a bid to buy AWA, without disturbing the proposed merger, leaving Alaska the bigger shareholder in the new merged company. Vincent Carino, president of Brookhaven Capital Management, which owns AWA and Alaska shares, says: "Alaska's top management is considering a move to buy America West to gain critical mass and to better compete in the fiercely competitive industry -- and avoid being a takeover target itself." One major West Coast airline analyst, who didn't want to be named, says it would be "a great deal." Alaska's management "is capable of doing it -- and it should," he says. Alaska's market cap is $780 million, vs. AWA's $107 million. Alaska's stock is up from 18 last Aug. 9 to 28 on June 1. Carino says Alaska could use its stock as currency to buy AWA, now 5.72 a share, possibly at 7 a share. Alaska declined comment; AWA didn't return calls.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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