Law Group Investigates AirTran And Southwest Airlines Merger

 

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Law Group Investigates AirTran And Southwest Airlines Merger

By Bill Goldston
 

September 28, 2010 - Kendall Law Group, led by former federal judge Joe Kendall, is investigating AirTran Holdings Inc. for shareholders in connection with the proposed acquisition by Southwest Airlines.

The national securities firm’s investigation seeks to determine whether AirTran and its Board breached their fiduciary duties by entering into the agreement without properly shopping for a deal that would provide better value for shareholders. 

On September 27, 2010, the companies announced that they had entered into a definitive merger agreement under which AirTran would be acquired by Southwest in a transaction valued at approximately $1.37 billion.

 

Under the terms of the agreement, AirTran stockholders will receive a combination of Southwest common stock and cash valued between $7.25 and $7.75, with at least $3.75 in cash, for each share of AirTran/AAI common stock held. According to Thompson/First Call, at least one analyst has set a price target of $11 per share for AirTran stock. Due to these factors, the firm believes the transaction may be undervaluing the company.

Kendall Law Group was founded by a former federal judge, includes a former United States Attorney, prosecutors and securities lawyers who are experienced in complex securities litigation. The firm has been counsel in numerous merger and acquisition cases nationwide, including some of the largest transactions in the United States. 

Southwest Airlines reports closing stock price of $12.28 on September 24, 2010, 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 September 24, 2010 closing price of AirTran stock. 

“The agreement has been unanimously approved by the boards of directors of each company, and closing is subject to the approval of AirTran stockholders, receipt of certain regulatory clearances, and fulfillment of customary closing conditions,” said Southwest Airlines. 

 

"Today is an exciting day for our Employees, our Customers, the communities we serve, and our Shareholders," said Gary C. Kelly, Chairman, President, and CEO of Southwest Airlines. "As we approach our 40th Anniversary of providing exceptional Customer Service at everyday low fares, the acquisition of AirTran represents a unique opportunity to grow Southwest Airlines' presence in key markets we don't yet serve and takes a significant step towards positioning us for future growth. 

The acquisition will significantly expand Southwest Airlines' low-fare service to many more Customers in many more domestic markets, creating hundreds of additional low-fare itineraries for the traveling public. Moreover, the expansion of low fares should generate hundreds of millions in annual savings to consumers. Based on an economic analysis by Campbell-Hill Aviation Group, LLP*, Southwest Airlines' more expansive low-fare service at Atlanta, alone, has the potential to stimulate over two million new passengers and over $200 million in consumer savings, annually. 

Based on current operations, the combined organization would have nearly 43,000 Employees and serve more than 100 million Customers annually from more than 100 different airports in the U.S. and near-international destinations. In addition, the combined carriers' all-Boeing fleet consisting of 685 active aircraft would include 401 Boeing 737-700s, 173 Boeing 737-300s, 25 Boeing 737-500s, and 86 Boeing 717s, with an average age of approximately 10 years, one of the youngest fleets in the industry. Southwest Airlines also announced, previously, that it is evaluating the opportunity to introduce the Boeing 737-800 into its domestic network to complement its current fleet, providing opportunities for longer-haul flying and service to high-demand, slot-controlled, or gate-restricted markets. This acquisition supports Southwest Airlines' evaluation of the Boeing 737-800.

 

 
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