Allegiant remains on track with $1.5B merger with Sun Country

Despite the headwinds of high jet fuel prices creating havoc in the aviation industry, Las Vegas-based Allegiant Air remains on track to complete its planned merger with Minnesota-based Sun Country Airlines later this month.

In a conference call with investors Thursday, Allegiant executives said they expect shareholders from both companies to consider the $1.5 billion deal on May 8 with the anticipated close of the transaction on May 13. Regulators already have signed off on the transaction that would blend two of the nation’s largest and most successful leisure air carriers. The airline initially expected the merger’s completion in the second half of this year.

The combination brings together complementary route networks across Allegiant’s small and mid-sized localities and Sun Country’s larger cities and will provide more than 650 routes, including 551 Allegiant routes and 105 Sun Country routes. Between them, the two airlines have about 22 million passengers annually.

Under terms of the deal, Allegiant would acquire Sun Country in a cash and stock transaction at an implied value of $18.89 per Sun Country share. Sun Country shareholders will receive 0.1557 shares of Allegiant common stock and $4.10 in cash for each Sun Country share owned, representing a premium of 19.8 percent over Sun Country’s closing share price of $15.77 when the deal was announced in January and 18.8 percent based on the 30-day volume-weighted average price. The transaction values Sun Country at $1.5 billion, including $400 million in Sun Country debt.

Upon closing, Allegiant and Sun Country shareholders would own approximately 67 percent and 33 percent, respectively, of the combined company on a fully diluted basis.

“We need to closely monitor the evolving geopolitical environment and will adjust our operations as conditions warrant,” Allegiant Travel Co. CEO Greg Anderson told investors in Thursday’s call. “We’re already taking actions and agility still give us ample time to refine these decisions as the year unfolds. Fuel prices will weigh on near-term industry profits. The gap between efficient, well-run operators is widening. Allegiant and Sun Country are on the right side of that gap.”

Anderson said Allegiant has made some schedule adjustments on long-range flights to reduce fuel consumption, but he also said the delivery of new fuel-efficient Boeing 737 jets would enable the company to resume those flights.

Allegiant reported net income of $42.5 million, $2.30 a share, on revenue of $732.4 million for the quarter that ended March 31. That compares with net income of $32.1 million, $1.73 a share, on revenue of $699.1 million for the same period a year ago.

Allegiant shares, traded on the Nasdaq exchange, closed Thursday at $75.64 a share, up $1.13, 1.5 percent, on above-average volume.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on X.