Anatomy of a merger: How Alaska Airlines and Virgin America reached their deal

 Alaska Airlines was not the only airline that wanted to acquire Virgin America. Photo: Alaska Airlines. 

Alaska Airlines was not the only airline that wanted to acquire Virgin America. Photo: Alaska Airlines. 

How did Alaska Airlines reach its deal to acquire Virgin America?

Both sides have said little about how they consummated the merger. Perhaps they learned from former United Airlines CEO Jeff Smisek, who, while CEO of Continental Airlines, called US Airways, the "ugly girl." He had been explaining why Continental preferred United as merger partner. 

We may never know all that happened between Alaska and Virgin America. But they're both publicly-traded corporations, and Virgin America recently gave some details in a regulatory filing about how it ended up with Alaska. 

Perhaps the most interesting part in Virgin America's filing? The airline said it had three suitors other than Alaska - named in the filings as Companies A, B, C.

Given press reports, we can logically presume Company A is JetBlue. But who are Companies B and C? Each pulled out quickly, but for a short time, they were both in the mix. 

Here's some information, pulled from the filing, about the lead-up to frenzied March and April 2016 negotiations. 

  • In September 2014, Company A and Virgin America discussed a potential merger. Nothing happened and Virgin America held an IPO later that year. 

  • In late 2015, another airline - called Company B in the filings -  approached Virgin America. Company B and Virgin America signed a confidentiality agreement in November 2015. Company B would later drop out after being told it was not an ideal suitor for Virgin America.

  • In November 2015, Alaska CEO Brad Tilden approached Virgin America about a possible merger.

  • In December 2015, Virgin America started assembling its team - lawyers, consultants, bankers etc. - to crunch numbers about whether a merger would be the right move. 

  • On Dec. 11, 2015, Alaska and Virgin America signed a confidentiality agreement. During a meeting, "the Alaska Air Group management team described the strategic objective of a purchase of [Virgin America], and the similarities between the two companies in a number of areas including the areas of operational performance, customer service focus and employee engagement," the filing said.

  • Three days later, Virgin America's CEO was dining with the CEO of Company A. "On Dec. 14, 2015, [Virgin America CEO David] Cush had dinner with the chief executive officer of Company A and discussed a potential business combination involving the two companies," the filing said.

  • On Jan. 5, 2016, Virgin America heard from a larger airline, which it calls Company C. A couple of months later, Company C would drop out, believing its merger with Virgin America would not be approved by regulators. 

And here's information on the offers made by Alaska and Company A. 

  • On Dec. 17, 2015, Alaska signaled it might pay $44.75 per share. But by February, it wasn't sure it still wanted Virgin America.

  • On Feb. 12, 2016, Company A said it might pay $43 per share. 

  • Between Feb. 16 and Feb. 29, representatives for Virgin America tried " encourage Alaska Air Group to re-engage in the process and improve upon its initial offer," the filing said.

  • That must have worked, as on Feb. 29, Alaska said it would pay $45 per share for Virgin America.

  • On March 2, 'Company A' said it might pay up to $46 per share for Virgin America. 

  • After the two bids, Virgin America said it wanted final offers by the end of March.

  • On March 31, Alaska Airlines offered $48 per share. Company A said it would pay $50. 

  • On April 1, representatives for Alaska said the airline would be willing to go up to $53.50.

  • Later on April 1, Company A was told about Alaska's new proposal. Company A said it would go up to $55 per share. It told Virgin America this was its, "highest possible offer."

  • Representatives for Virgin America returned to Alaska later that day. Alaska said it would pay $57, "but conditioned that price on signing a definitive merger agreement that evening."

  • The CEO of 'Company A' said he would not go higher, and the Alaska deal was finalized. 

  • The deal was announced on April 4. 

Here's the entire filing. You'll find discussion about the merger timeline on pages 28-34.

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