Spirit Airlines Incorporated (NYSE:SAVE) has rejected JetBlue Airways Corporation (NASDAQ:JBLU)’s acquisition offer and says it will stick to its February deal with Frontier Group Holdings Inc (NASDAQ:ULCC). Antitrust issues are said to play a role in the turndown.
Regulatory Concerns
As reported by CNN Business, Spirit said regulators would not approve an acquisition by JetBlue, which had announced Monday it was offering a $200 million break-up fee should the deal be off due to antitrust grounds.
Q1 2022 hedge fund letters, conferences and more
In a letter addressed to JetBlue, Spirit said: “We believe a combination of JetBlue and Spirit has a low probability of receiving antitrust clearance so long as JetBlue's Northeast Alliance with American Airlines Group Inc (NASDAQ:AAL) remains in existence.”
“Given this substantial completion risk, we believe JetBlue's economic offer is illusory, and Spirit's board has not found it necessary to consider it,” the company further said.
Despite the break-up fee add-on to an initial all cash-offer of $33 a share by JetBlue, Spirit turned the approach down and said it favored a deal with Frontier instead.
A Better Option
In February, Spirit and Frontier had agreed on a stock-and-cash deal valued at $25.83 a share. However, as per Frontier’s Friday’s closing, it is now worth $22.42 a share.
In the same letter, Spirit said the deal with JetBlue would not go through in regulatory terms as it would mean the acquisition of a low-cost airline by a higher fare carrier, and hence, higher fares for consumers.
Regulators in the U.S. are sensitive to this type of merger as proved by the federal suit issued by the Justice Department in September to stop the alliance between JetBlue and American Airlines.
Back then, the DOJ said such association could impact prices directly and would diminish options passengers could have to travel from and to important cities in the Northeast —the case is ongoing in court.
Spirit added, “Spirit believes that merging with Frontier will enable the combined ultra-low-cost carrier business to achieve scale, improve operational reliability, have increased relevance to consumers, and do an even better job of delivering ultra-low fares to more consumers and competing more effectively against the Big Four carriers, as well as against JetBlue.”
