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JetBlue (JBLU) Move In On Spirit (SAVE) Acquisition, Should You Buy?

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Updated 16 May 2022

Key points:

  • JetBlue moves in on all-cash acquisition of JetBlue, locked in takeover battle with Frontier Holdings
  • JetBlue offered 30$ a share, stating a negotiation of $33 is on the cards
  • The acquisition comes as a bid to compete against the US ‘big four' airlines

Following talks last month, JetBlue has reiterated its once-declined offer for an all-cash takeover of Spirit Airlines (NYSE: SAVE). The intended acquisition acts as a bid to compete with the ‘Big Four’ airlines that currently dominate nearly 80% of the US passenger market. JetBlue is now locked in a takeover battle with Frontier Group Holdings, also issuing a ‘Vote No’ proxy statement that hopes to urge Spirit stakeholders to deny the proposed deal with Frontier. 

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In the official letter, JetBlue offered 30$ a share but followed with a statement saying the company is ready to  “negotiate in good faith a consensual transaction at $33, subject to receiving necessary diligence”. Spirit previously rejected the $33 bid, stating the offer had a low likelihood of winning approval from regulators. SAVE shares are currently trading at a premarket gain of 16% in response to the hostile bid. Spirit investors will have to wait until June 10th for news regarding the proposed deal with Frontier.

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Interest in Spirit was registered back at the beginning of April, when company CEO Robin Hayes pitched his vision of a dual budget airline to Spirit CEO Edward Christie, citing a new ‘leading player’ best positioned to serve customers by offering improved flight schedules and even more competitive fares.

JetBlue, which is already the sixth largest US passenger carrier, would operate Spirit under the existing JetBlue tag, while also promising a $200M reverse break-up fee should the deal not go through due to antitrust reasons – Spirit are apparently looking for a substantially higher reverse break-up fee. 

The company is yet to respond regarding today’s bid, but it will be interesting to see if mounting pressure has any effect on management’s plans for the takeover.