Alaska Airlines revises press release, merger with Hawaiian Airlines not “approved” after all
At the beginning of the week, it looked as if the Justice Department had cleared Alaska Airlines’ acquisition of Hawaiian Airlines on antitrust grounds. All that was missing was approval from the Department of Transportation, which would be more likely and relatively quick.
Hawaiian Airlines shares were at $4.86 before Alaska Airlines agreed to pay $18 per share for the company and assume an additional $900 million in debt. Hawaiian shares closed Thursday at $17.36, slightly lower than Wednesday but still reflecting a high degree of certainty that the deal would go through.
As I wrote on Monday,
- The deal seemed likely as long as the parties could find a compromise. There is no fundamental competition problem and there were no political protests against it. Hawaii’s politicians supported the deal and the unions did not actively oppose it. Alaska does not compete on the inter-island routes today and the market between the mainland and Hawaii is highly competitive. There is a zone of possible agreement.
- However, I did not expect the Justice Department to simply approve the deal. It seemed quite likely that it would insist on conditions, such as service commitments for the inter-island routes.
- This was especially true after Alaska and the Department of Justice twice agreed to extend the statutory review period, creating the impression that they were in the middle of negotiations rather than that the Department needed more time to review the agreement and decide whether to appeal it.
It is very odd that the Justice Department simply approved the deal after several delays rather than asking for something in return. If they wanted to approve it, it seems they would have done so a few weeks ago.
Technically, the Justice Department has not “approved” the deal. It can still challenge it (it can sue to throw out a deal after it’s been finalized; the parties simply couldn’t close during the review period).
And Alaska has quietly amended its press release to state, “The government review is ongoing.”
Here is the original text: “The deadline for the U.S. Department of Justice to complete its regulatory investigation of the proposed merger of Alaska Airlines and Hawaiian Airlines under the HSR Act has expired,” a copy of the original press release states.
Here is the wording in today’s press release: “The period during which parties were prohibited from closing under the HSR Act has expired. The government’s review is ongoing.”
Everything is securities fraud? If the Justice Department sues to block the deal before it closes, there will almost certainly be a shareholder lawsuit. Still, Hawaiian stock did not fall in after-hours trading and remains well above $17 per share, suggesting that the deal will still go ahead despite this change in wording.
