Regional airline operator SkyWest Inc. said Wednesday that its Atlantic Southeast subsidiary would acquire ExpressJet Holdings Inc. for about $133 million in cash.
The deal values ExpressJet at about $6.75 a share, more than double its day-earlier closing price. Shares jumped to $6.51 in recent trades, up about 99%. Subject to regulatory approval, the merger agreement is expected to close in the fourth quarter, according to SkyWest.
"We are positive on the proposed deal, which we think adds much needed revenue diversification to both companies," according to Jim Corridore, an airlines analyst with Standard & Poor's Equity Research.
The St. George, Utah-based operator owns SkyWest Airlines as well as Atlantic Southeast. Combining ExpressJet and Atlantic Southeast may also help SkyWest tap into benefits of the merger between United Airlines parent UAL Corp. and Continental Airlines, also scheduled to close before the end of the year. Atlantic Southeast flies for United, as well as Delta Air Lines and AirTran Holdings.
Until recently, ExpressJet served as a feeder airline exclusively for Continental but in February signed a smaller contract with United.
"We believe this transaction provides a significant premium over ExpressJet's current market price for its stockholders and that the combined airline will be able to provide a stable, platform for growth for ExpressJet employees after this transaction closes," said ExpressJet Chairman George Bravante, according to a statement.
Based in Houston, ExpressJet will move its headquarters to Atlanta but plans to maintain a significant presence at Continental hubs in Houston; Newark, N.J.; and Cleveland, as well as United's hub in Chicago, the company said.
Once a single operating certificate is received from the U.S. government, Atlantic Southeast intends to transition certain existing ExpressJet support functions to Atlantic Southeast and SkyWest to create efficiencies and capitalize on growth opportunities.
