Virgin America Gets Takeover Bids From JetBlue and Alaska Air

  • Deal for carrier said to possibly happen as early as next week
  • Richard Branson-backed airline went public only 18 months ago

Virgin America Inc. received takeover offers from JetBlue Airways Corp. and Alaska Air Group Inc. after the carrier backed by billionaire Richard Branson put itself up for sale, according to people familiar with the matter.

Discussions between Virgin America and the two bidders are ongoing, and a deal could be announced as early as next week, the people said, asking not to be identified discussing private information. It is unclear if other suitors will emerge, and Virgin America may yet decide to abandon sale negotiations in favor of remaining independent.

Last week, Bloomberg reported that the carrier, which flies to destinations throughout the U.S. and Mexico, was working with financial advisers on a sale after receiving takeover interest. Virgin America’s stock has been up almost 10 percent since then, giving it a market capitalization of $1.3 billion.

Virgin America shares jumped as much as 15 percent, and closed up 10 percent at $37.70 Monday. JetBlue gained 2.7 percent to $20.79, while Alaska increased 1.1 percent to $81.49.

Best Bidder

“If the company were to sell itself, JetBlue would make the most sense from an aircraft, network and product offering perspective,” Helane Becker, a Cowen & Co. analyst said in a report Monday.

Acquiring Virgin America would give JetBlue a larger presence on the U.S. West Coast, including in Los Angeles and San Francisco, and would eliminate a competitor for business travelers on lucrative cross-country routes. Strength in the western part of the country would complement JetBlue’s major presence in New York and network along the U.S. East Coast and in the Caribbean. Both airlines operate Airbus Group SE aircraft.

Alaska would eliminate a West Coast rival by buying Virgin America and would expand its route network in Mexico. Alaska primarily flies Boeing Co. planes.

Branson is the founder of the Virgin Group, which also owns stakes in gyms, hotels and telecommunications companies around the world. Virgin America started flying from San Francisco in 2007.

Virgin America last month reported 2015 adjusted earnings of $201.5 million, the most in the company’s history. The airline received five new Airbus A320 aircraft last year, with plans for five more this year, after slowing growth in 2012 to focus on long-term survival. It expects to grow capacity by 10 percent a year in 2017 and 2018.

Shareholder Plans

Virgin America is 54 percent owned by Branson’s fund, VX Holdings, and Cyrus Capital Partners, Becker said in the report. “The large shareholders could be seeking to monetize their investment with a sale to another investor or a partial sale to a foreign airline/company that would have a code-sharing agreement attached to it,” she said.

Virgin America, based in Burlingame, California, sold stock in a $353 million initial public offering less than 18 months ago, pricing its shares at $23 apiece, data compiled by Bloomberg show.

Alaska spokeswoman Bobbie Egan said the company doesn’t comment on rumors or speculation. JetBlue spokesman Doug McGraw said the carrier had the same policy. Virgin America didn’t return phone calls seeking comment.