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Southwest agrees to buy AirTran

Sept. 27, 2010, Dallas, Tex. - Southwest Airlines Co. has agreed to buy AirTran Holdings Inc. for about $1.4 billion in cash and stock, giving it access to Atlanta, one of the world’s busiest airports.


September 27, 2010
Carey Fredericks

The offer values Orlando, Florida-based AirTran at $7.69 a
share, 69 percent more than its closing price on Sept. 24,
Southwest said today in a statement. The transaction price
includes AirTran’s convertible notes.

Atlanta, AirTran’s biggest hub, is the largest U.S. market
Dallas-based Southwest doesn’t already serve. The purchase is
Southwest’s largest in at least five years, according to
Bloomberg data, and fulfills its goal of adding flights to
Mexico and the Caribbean. The acquisition also expands its
presence at New York’s LaGuardia and Boston’s Logan airports.

“It’s a perfect fit,” said Ray Neidl, an analyst at Maxim
Group LLC in New York who doesn’t rate the stocks. “This fills
a big hole in the southeast for Southwest, and they’re getting a
very good asset while also eliminating a competitor that would
have overlapped with them eventually.”

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In the past five years, the U.S. airline industry has seen
nine acquisitions of publicly traded companies with an average
premium of 34 percent, according to data compiled by Bloomberg.
Southwest is paying 5.4 times AirTrans earnings before interest,
tax, depreciation and amortization, compared with the median
multiple of 4.8.