Alaska Air Group announced the acquisition of Virgin America on April 4th, 2016. You are asked to determine, based on publicly available (external) data, whether or not this was likely a value enhancing acquisition for the shareholders of Alaska Airline. Specific tasks: 1. Estimate the premium offered. Given the average premium offered is 25% of the targets pre-acquisition market value, what does the premium offered by Alaska Airline suggests regarding the likelihood that this was a value enhancing acquisition? 2. Examine the value relevant characteristics of Alaskas acquisition of Virgin America (see slide 18, entitled Characteristics of Value Enhancing Acquisitions in the class notes for Section V). Based on the three characteristics that have the strongest correlation with value enhancing deals, would the market expect this acquisition to be value enhancing or value destroying? Are the other factors helpful in determining whether or not this acquisition is value enhancing. On net, what does the value relevant characteristics of this M&A event suggest regarding the likelihood it is value enhancing? 3. Analyze the markets reaction, Alaskas five-day abnormal return, to the April 4th, 2016 announcement of the agreed acquisition. Did the markets reaction suggest the market viewed the event as value enhancing or value destroying? 4. Analyze Alaskas operating performance both prior to the event (2014 and 2015) and after the event (2017 and 2018). You should examine Alaskas operating performance using peer-adjusted operating margin (= Alaskas OM Peer Average OM) and peer-adjusted operating return on assets (= Alaskas OROA Peer Average OROA). For peer averages use SouthWest Airline and JetBlue Airline as peer firms. What is the implication of your results regarding the value creation/destruction aspect of this acquisition? 5. Analyze Alaskas stock return performance for the two-year period starting two days prior to the acquisition announcement date. You should examine the Alaskas stock return performance using both peer firms (focus on peer firms average returns) and the S&P 500 as benchmarks when measuring Alaskas abnormal post-acquisition returns. What is the implication of your results regarding the value creation/destruction aspect of this acquisition? I am expecting you to provide a well written two or three page (double spaced, font size 12 and reasonable margins) report describing your analysis of whether or not this acquisition was likely to be value enhancing. Your report should include an introduction, briefly describing the acquisition and what will be analyzed in your report. The body of the paper should contain one paragraph for each task, describing the process, the results, and the implication of your results. Finally, a concluding paragraph that summarizes/synthesizes the key findings and provides your opinion based on these key findings whether or not this acquisition was value enhancing or value destroying for the shareholders of Alaska Airline.