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• JetBlue’s offered a 50% premium over Spirit’s Monday closing price of $21.96
Spirit Airlines Inc (NYSE: SAVE) on Tuesday said JetBlue Airways Corp (NASDAQ: JBLU) has proposed to acquire the budget carrier, sparking a chance of a bidding war as Spirit signed a merger deal with Frontier in February to combine into a discount airline behemoth.
JetBlue offered an all-cash deal of $33 per share to buy Spirit totaling around $3.6 billion. However, the Florida-based Spirit signed a merger deal on February 7 with Frontier Group Holdings Inc (NASDAQ: ULCC).
Frontline decided to pay $2.9 billion in cash and shares to merge with Spirit to create America’s most competitive ultra-low fare airline.
The report of the unsolicited offer was first reported by The New York Times earlier Tuesday. Spirit confirmed the deal after the market closed.
Shares of Spirit jumped over 22% following the NYT report, and trading was halted before the market closed.
While JetBlue shares closed down about 7%, Frontier jumped nearly 4% on the news.
Spirit said its board was evaluating JetBlue’s proposal and will “pursue the course of action it determines to be in the best interests of Spirit and its stockholders.”
Consolidation of airlines industry
The interest for Spirit shows renewed appetite for consolidation in the airline industry as it is looking for ways to come out of two difficult pandemic years that hurt travel demand.
US carriers are now scrambling to hire more workforce to meet a rebound in travel.
Spirit and Frontier both exclusively fly Airbus A320 planes. JetBlue’s fleet is also made up of mostly planes from the A320 family, and the merger would reduce costs and logistical pains in combining the carriers.
However, JetBlue has a partnership with American Airlines Group Inc (NASDAQ: AAL) that allows the carriers to coordinate service in the Northeast US to compete against United Airlines Holdings Inc (NASDAQ: UAL) and Delta Air Lines Inc (NYSE: DAL) in the crowded airports including New York and Boston.
Last year, the US Department of Justice sued to block the partnership.
Picture Credit: FlightGlobal