JetBlue Announces $3.8 Billion Deal For Spirit After Frontier Merger Fails To Take Off

Topline

JetBlue Airways on Thursday announced plans to purchase Spirit Airlines—a day after Spirit’s anticipated merger with Frontier fell apart—in a deal that could create the country’s fifth-largest carrier if approved by regulators.

Key Facts

JetBlue said Spirit had agreed to an all-cash buyout worth $3.8 billion.

Spirit shareholders will receive $33.50 per share in cash under the terms of the deal, the airlines announced.

This includes a prepayment of $2.50 per share once Spirit stockholders have approved the transaction—this is before the deal even closes—and a “ticking fee” of 10 cents a month from January 2023 until the deal closes.

Both airlines will continue operating independently until the deal closes, the firms said in a statement, adding that loyalty programs and customer accounts will “not be affected in any way.”

Spirit shares were up nearly 4% in premarket trading on Thursday morning after the deal was announced and JetBlue was up around 1.5%.

News Peg

The announcement ends a protracted battle over the right to acquire Spirit as JetBlue and Frontier have waged a bidding war over the budget airline since early April. Frontier’s offer was lower than JetBlue’s but favored by Spirit’s board who felt it more likely to gain regulatory approval. Spirit grounded plans to merge with Frontier on Wednesday but said talks with JetBlue were ongoing.

What To Watch For

Competition watchdogs. The merger is still subject to approval from regulators. Given the nature and size of the two airlines involved, antitrust regulators are likely to take a keen interest in the deal. Spirit rejected an earlier takeover bid from JetBlue in May, citing the low likelihood of government antitrust regulators greenlighting the deal. If the deal falls through for antitrust reasons, JetBlue will pay Spirit $70 million and Spirit shareholders $400 million, less anything already paid prior to termination.

Big Number

$600-700 million. That’s how much JetBlue said it expects to save each year once the deal closes. The airline says this will mostly be driven by expanded customer offerings. The combined company is expected to have annual revenues of around $11.9 billion, based on 2019 revenues, JetBlue said.

Further Reading

Spirit And Frontier Airlines Cancel Merger Plans—Opening Door For JetBlue’s Offer (Forbes)

Frontier Airlines ‘Very Far’ From Having Votes For Spirit Merger (Forbes)