spirit airlines

Spirit rejects JetBlue takeover offer

On Monday May 2, 2022, the board of Spirit Airlines (NYSE:SAVE) rejected JetBlue Airway Corp´s (NASDAQ: JBLU) takeover offer, citing anti-trust legislation as the reason behind the rejection.

The takeover offer was for $33-per-share, and on Friday JetBlue had sweetened the offer with a $200 million reverse break-up fee ($1.80 per Spirit share) if the deal could not go through due to anti-trust legislation.

According to Spirit Airline´s board of directors, the transaction had a low likelihood of being approved by governmental regulators.

Share price impact

Once the rejection had been announced, Spirit shares fell 9.4% to $21.40.

Why is Spirit worried?

In a letter to JetBlue, Spirit chairman H. McIntyre Gardner did not mince words, as he called JetBlue´s offer illusory, and explained that because of the substantial completion risks “Spirit´s board has not found it necessary to consider it”.

JetBlue is currently involved in an antitrust lawsuit with the U.S. Government, as they were sued by the U.S. Justice Department in September last year over the Northeast Alliance partnership between JetBlue and American Airlines.

“We believe a combination of JetBlue and Spirit has a low probability of receiving antitrust clearance so long as JetBlue’s Northeast Alliance (NEA) with American Airlines remains in existence,” Spirit said in the letter to JetBlue Chief Executive Officer Robin Hayes on Monday.

In the United States, the Biden administration is considered to be more negative to mergers than the Trump administration.

More than one suitor

JetBlue is not the only airline with its eyes on Spirit; the airline Frontier has also revealed a strong interest in the Florida-based low-cost airline. According to Frontier, a merger with Spirit would help them compete with the big four legacy airlines that currently account for almost 80% of the U.S. passenger market: United Airlines, Delta Air Lines, American Airlines, and Southwest Airlines.

In February this year, Frontier made a cash and stock bid offer to Spirit valued at roughly $21.66 per share.

JetBlue has not given up

After being rejected by Spirit on Monday, JetBlue is now offering Spirit a remedy package which aims to further decrease the risk of the U.S. government prohibiting the deal.

The package includes the divestiture of all Spirit assets in New York and Boston, to prevent JetBlue from increasing its presence in airports covered by the Northeast Alliance partnership. The package also includes gates and assets at certain other airports, including Fort Lauderdale, Florida.