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Southwest to buy AirTran, expand service

Southwest Airlines said Monday that it will acquire all of outstanding common stock of AirTran Holdings Inc., parent company of AirTran Airways, for a combination of cash and Southwest common stock.

At Southwest closing stock price of $12.28 Friday, the transaction values AirTran common stock at $7.69 per share, or approximately $1.4 billion in the aggregate, including AirTran’s outstanding convertible notes. This represents a premium of 69 percent over the Friday close of AirTran stock. Under the agreement, each share of AirTran common stock will be exchanged for $3.75 in cash and 0.321 shares of Southwest Airlines’ common stock, subject to certain adjustments, based on Southwest Airlines’ share price prior to closing. Including AirTran debt and jet leases, the transaction value is approximately $3.4 billion.

The agreement has been unanimously approved by the boards of each company and is subject to the approval of AirTran stockholders.

“This acquisition … allows us to better respond to the economic and competitive challenges of our industry, and fits perfectly within our strategy for our fifth decade of service,” Gary C. Kelly, Chairman, President, and CEO of Southwest Airlines, said in a statement. “It offers customers more low-fare destinations as we extend our network and diversify into new markets, including significant opportunities to and from Atlanta, the busiest airport in the U.S. and the largest domestic market we do not serve, as well as Washington, D.C. via Ronald Reagan National Airport. The acquisition also allows us to expand our presence in key markets, like New York LaGuardia, Boston Logan, and Baltimore/Washington.”


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