Spirit Airlines (NYSE: SAVE) on Monday sinked after rejecting JetBlue’s offer of $33-per-share. The reason given by the board was that it had a low likelihood of winning approval from government regulators.
JetBlue responded by enhancing its offer – but not its $33 per share price – and promising a $200 million reverse break-up fee – or $1.80 per Spirit share – if the deal does not go through for antitrust reasons. JetBlue’s offer is significantly higher than the current $22.44 per share value of the cash and stock bid from Frontier made in February.
Frontier and JetBlue are in a battle for Spirit to better compete with legacy carriers, or the “big four” airlines that control nearly 80% of the U.S. passenger market.
“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 a letter to JetBlue Chief Executive Robin Hayes
“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.”Spirit Airlines
With the ultra-low budget carrier expected to announce its Q1 results in a couple of days, it will be interesting to see if this was the right decision by the board. Analysts expect the company to report a revenue of $962.5M and an EPS of -$1.57.