Why This Alaska Air Analyst Believes Hawaiian Holdings Deal Could Hurt Sentiment

Shares of Alaska Air Group, Inc. ALK tanked over 15% in early trading on Monday, after the company inked an acquisition deal with Hawaiian Holdings, Inc. HA

The deal is unlikely to close for 12 to 18 months and the complexity of executing it could weigh on sentiment, according to Raymond James.

The Alaska Air Group Analyst: Savanthi Syth downgraded the rating for Alaska Air Group from Strong Buy to Market Perform, while removing the price target.

The Alaska Air Group Thesis: At $18 per share, the acquisition deal represents a 270% premium to Friday’s closing price of Hawaiian Holdings shares, Syth said in the downgrade note.

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The deal would give Alaska Air Group a leading position in the more than $8 billion Hawaii market, the analyst stated. The deal makes sense, Alaska Air has the “balance sheet and earnings strength to see it through” and the acquisition should enhance Alaska Air’s loyalty program and credit card offering, she added.

“However, given the current macro uncertainty, the complexity of executing the merger should weigh on sentiment and likely limits the near- to medium-term upside case,” Syth further wrote.

ALK Price Action: Shares of Alaska Air Group had declined by 15.1% to $33.77 at the time of publication on Monday.

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