Alaska Air strikes deal to buy Virgin America for $2.6bn

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Alaska Air has reached a deal to buy Virgin America for $2.6 billion.

The merger airline will become the fifth largest in the United States and will help it compete against larger rivals for lucrative business and international travellers visiting San Francisco and Los Angeles as well as Seattle, where the company is based.

The deal, which has been approved unanimously by both company's boards, offers $225 million total net synergies annually at full integration, the companies said.

The agreement followed a bidding war that saw Alaska Air and JetBlue Airways compete against each other but Alaska air eventually triumphed.

“Our employees have worked hard to earn the deep loyalty of customers in the Pacific Northwest and Alaska, while the Virgin America team has done the same in California,” said Brad Tilden, chairman and CEO of Alaska Air Group.

Shares of Virgin America soared more than 30 per cent in premarket trading on the report.

Alaska's offer of $57 per share in cash represents a premium of about 47 percent to Virgin's Friday's close. Including Virgin America's debt and aircraft lease obligations, the transaction value amounts to about $4 billion, the company said.

Sir Richard Branson could get a near-$500 million out of the sale of his US airline.

He retains around 22 per cent of Virgin America through his offshore investment vehicle VX Holdings, which would make a $2bn sale worth up to $480m to the businessman.

Additional reporting by Reuters