Originally Posted by Monocoupe

Interesting read. Copied from Mrs. Hageman's article www.planebusiness.com

Shifting below the Canadian border, Jon Ostrower reported last week in his new publication, The Air Current, that a deal is in the works that would see regional airline Republic Airways acquire Trans States Holdings. Republic and Trans States are, respectively, the second and third largest regional airlines in the U.S. Nevertheless, if the two were to merge, SkyWest would remain the largest U.S. regional airline.

While talk about this link-up has been out there before, I found the timing of Jon's story interesting, as it came out right before the Mesa Air Group IPO is to be priced on Tuesday of this week.

That deal, which we had previously discussed when Mesa filed its initial registration statement with the SEC, was tentatively priced last week at $14-$16 a share. The airline would raise $160.5 million using the midpoint of this pricing. Proceeds of the offering will be used to pay down debt and for "general corporate purposes." Raymond James and BofA Merrill Lynch are lead bookrunners on the deal with Cowen, Stifel, and Imperial Capital acting as co-managers.

Assuming a successful IPO at the midpoint of the proposed price range, the company’s post-IPO market capitalization would be roughly $528 million, excluding the effect of underwriter over-allotment options.

For those of you with enquiring minds, you can watch the retail roadshow presentation here.

But again, do I think there is a link between news being leaked about a potential deal between Republic and Trans States and the Mesa IPO? Yes. Mesa said in its registration documents that one of the things it would consider doing with its new found money was "acquisitions". But it would have been very difficult for Mesa to consider an acquisition unless the airline did an IPO. Remember too that this IPO was rolled out very quickly – and as we mentioned before it's not exactly a great time for an IPO in the sector. In addition, while SkyWest just announced a slew of deals with its existing airline customers in its recent earnings call, there is no new growth cited in the Mesa presentations. Nor are there a lot of opportunities for new regional business out there – the result of scope pressure and increasing direct ownership of regional airlines by mainline carriers.

Put it all together, and yes, I think these two pieces of news are related. Either news of a potential deal was leaked in an attempt to short-circuit the viability of the Mesa IPO, or, a deal is indeed going to happen, and Republic made the decision to make the move now – before Mesa potentially has the financial means to start collecting regional partners. Like Trans States.