Topline
The U.S. federal government is poised to block JetBlue’s $3.8 billion merger with Spirit Airlines, according to several reports Monday, sending both companies’ stocks swinging and preventing what would be the country’s fifth-largest airline as Spirit’s messy saga to find a strategic partner drags on.
The Biden Administration appears set to block a marriage between JetBlue and Spirit.
Key Facts
The Justice Department could file an antitrust lawsuit against the transaction as soon as Tuesday, Bloomberg reported, citing sources familiar with the legal proceedings.
JetBlue CEO Robin Hayes confirmed his company believes a lawsuit is coming, telling the Wall Street Journal he expects the companies to “get sued by the DOJ this week” and that prosecutors have their “minds made up” about the merger.
JetBlue now hopes to close the acquisition early next year, a spokesperson said in an emailed statement.
The Transportation Department is simultaneously planning to prevent the transfer of Spirit’s airline license to JetBlue, according to Bloomberg, which would effectively sound the death knell for the transaction.
Shares of Spirit sank as much as 8% following the report, while JetBlue jumped 2%.
The federal agencies did not immediately respond to requests for comment.
Key Background
Spirit shareholders approved the merger with JetBlue last October valuing Spirit shares at $33.50, a nearly 50% premium from its Monday price. That agreement came just eight months after Spirit initially agreed to merge with fellow discount airline Frontier, later muddied by JetBlue’s hostile takeover bid launched last May. Politico reported last month that the Department of Justice planned to file an antitrust lawsuit against JetBlue and Spirit. JetBlue has pushed back on claims of anticompetitive behavior, releasing a memo Monday that argued a JetBlue-Spirit merger would make the newly combined airline more competitive with the four biggest U.S. airlines—Delta, American, United and Southwest.
Surprising Fact
JetBlue and Spirit are the 33rd and 36th largest airlines in the world by market capitalization, respectively, despite being among the most popular U.S. airlines. That’s largely due to each companies’ slumping bottom lines compared to competitors, with JetBlue’s $72 million profit and Spirit’s $12.6 million in profit in the most recent quarter comparing unfavorably to industry leader Delta’s $828 million profit.
Further Reading
JetBlue Sweetens Its Bid—But Spirit Airlines Says It Still Prefers Its Other Suitor (Forbes)
JetBlue And Spirit Take Their Bickering To Shareholders (Forbes)
JetBlue Goes Hostile In Takeover Bid Of Spirit Airlines (Forbes)
Source: https://www.forbes.com/sites/dereksaul/2023/03/06/jetblue-ceo-says-feds-will-sue-airline-over-its-38-billion-merger-with-spirit-this-week/