Insights

Why Atlas Air Stock Is Soaring Again Today

What happened

Days after word leaked that Atlas Air Worldwide Holdings (NASDAQ: AAWW) was in talks to be acquired, the cargo airline has reportedly reached an agreement on a deal. The stock has been gaining altitude all week and that continued on Wednesday, climbing by more than 10% on buyout anticipation.

So what

Atlas is a charter airline operator that provides freight, passenger, and military lift. The company is a big part of “Amazon Air,” the cargo airlines that are contracted to fly for Amazon.

The stock was up on Monday on reports that Atlas was in talks with a group led by Apollo Global Management (NYSE: APO), though there were few details about the terms of the deal or Atlas’ potential valuation.

On Wednesday, more details emerged. Bloomberg reported that Apollo has agreed to acquire Atlas for about $102.50 per share, or $3.2 billion, with a transaction announcement possible as soon as this week.

Apollo is a veteran airline investor, having backed Sun Country Airlines Holdings prior to that company’s initial public offering last year. Though the deal has not yet been announced the numerous reports suggest that an announcement is likely close, and the shares are trading closer to the reported takeout price as a result.

Now what

Following Wednesday’s jump Atlas shares are trading within 5% of the reported price, and likely don’t have much room to move from here. There is still some uncertainty, however.

Stifel analyst Frank Galanti in a note published after the deal talks were first reported estimated that Atlas could fetch between $90 and $120 per share in a buyout, implying there could be some room here for a bidding war. However, given Apollo’s ample resources it seems unlikely another buyer would engage this late in the process to start a bidding war.

There’s always the risk a proposed deal falls through, but based on the reports it appears the two sides are very far along in the process. The most likely outcome from here is that a deal announcement is coming soon, and in the next few months Atlas will no longer be a public company.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

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