Spirit Airlines Incorporated (NYSE: SAVE) jumped more than 25% on Wednesday after JetBlue Airways Corporation (NASDAQ: JBLU) said it wanted to buy the ultra-low-cost carrier for $3.60 billion in cash.
JetBlue could become the fifth largest U.S. airline
The proposal translates to $33 a share for Spirit Airlines, another 25% (roughly) upside from here. The offer comes on the heels of its merger agreement with Frontier Airlines at $25.83 per share.
If executed, JetBlue will secure the fifth spot on the list of the largest U.S. airlines. JBLU said:
We firmly believe our proposal constitutes a superior proposal under Spirit’s merger agreement with Frontier and represents the most attractive opportunity for Spirit’s shareholders.
JetBlue shares are down 7.0% on Wednesday. Spirit Airlines says it is evaluating the new bid.
Could it receive a nod from the regulators though?
Several analysts, however, have raised concerns if regulators would approve a merger between JetBlue and Spirit Airlines. On CNBC’s “Squawk Box”, CFRA Research’s Colin Scarola said:
There’s a lot more risk of taking competition out of the market on the East Coast if you let JetBlue and Spirit tie up. It’s a matter of overlap but also of pricing. JetBlue’s average tickets are 40% higher than Spirit. FTC will assume Spirit’s prices will track towards JetBlue’s, and higher prices are worse for consumers. So, I see a lot more risk for this deal to face anti-trust lawsuit.
A combination between Frontier and Spirit Airlines, on the other hand, would have remained an ultra-low-cost carrier. Responding to the new proposal, Frontier itself raised the same concern.
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Source: https://invezz.com/news/2022/04/06/jetblue-just-placed-a-superior-bid-to-buy-spirit-airlines/