Allegiant (ALGT) and Sun Country (SNCY) shareholders clear $1.5bn airline merger

Allegiant Travel (ALGT) and Sun Country Airlines (SNCY) shareholders separately approved the carriers’ merger and the related stock issuance at special meetings on Friday, clearing the last corporate hurdle ahead of an expected May 13 close. The cash-and-stock deal values Sun Country at about $1.5 billion, inclusive of $0.4 billion of net debt, and creates a leisure-focused low-cost carrier with about 195 aircraft and more than 650 routes.

At Allegiant’s special meeting in Las Vegas, holders of 16,060,619 shares, or roughly 87.05 per cent of those outstanding, were represented in person or by proxy. The proposal to issue new common stock to fund the merger consideration carried with 15,997,541 votes in favour, 34,204 against and 28,874 abstentions, according to the Form 8-K filed with the Securities and Exchange Commission. Sun Country shareholders cleared the merger agreement on the same day with 43,971,505 votes in favour, 32,926 against and 39,103 abstentions.

Under the terms agreed on January 11, Sun Country investors will receive 0.1557 Allegiant common shares plus $4.10 in cash for each SNCY share. That structure implied a value of $18.89 a share at signing, a premium of 19.8 per cent over Sun Country’s January 9 close of $15.77 and 18.8 per cent above the 30-day volume-weighted average. Allegiant shareholders will own about 67 per cent of the combined company on a fully diluted basis, with Sun Country holders taking the remaining 33 per cent.

The vote completes a regulatory path that already cleared the principal antitrust review. The Justice Department signed off on the deal earlier this year. The Department of Transportation granted a joint interim exemption on April 15, allowing the two airlines to operate as separate carriers under common ownership while pursuing a single FAA operating certificate. “This approval underscores the strength of our shared vision and the thoughtful approach both teams have taken throughout this process,” Allegiant chief executive Gregory C. Anderson said at the time.

Allegiant will keep its Las Vegas headquarters and retain Minneapolis-Saint Paul as an anchor base for the Sun Country network. Anderson stays on as chief executive of the combined group. Robert Neal becomes president and chief financial officer post-closing, and Maury Gallagher continues as chairman. The company is targeting $140 million of annual run-rate synergies by year three, drawn from network optimisation and procurement scale across the largest leisure-focused U.S. carrier outside the legacy network airlines.

The combined fleet of about 195 aircraft, with 30 more on order and 80 options, will fly 551 Allegiant and 105 Sun Country routes, including 18 international destinations across Mexico, Central America, Canada and the Caribbean, serving roughly 22 million passengers a year. Sun Country’s cargo agreement with Amazon, a meaningful contributor to its first-quarter revenue, transfers with the merger.

Barclays advised Allegiant, with Skadden, Arps, Slate, Meagher & Flom as legal counsel. Goldman Sachs advised Sun Country, with Milbank as counsel. With shareholder and regulatory approvals now in hand, the focus turns to the May 13 closing date and integration milestones, after which Sun Country becomes a wholly owned Allegiant subsidiary. The deal is one of the larger U.S. airline tie-ups this cycle, alongside boutique investment-bank M&A activity servicing mid-cap consolidation.