A triangle “love spat” seems to be occurring between JetBlue, Spirit and Frontier Airlines.
Frontier made an offer to merge with Spirit Airlines in February.
In March, JetBlue stepped in and made an offer to merge with Spirit.
Spirit rejected JetBlue’s proposal, and decided to merge with Frontier Airlines. Spirit’s board rejected JetBlue due to JetBlue’s alliance with American Airlines.
JetBlue Airways Corp said it plans a hostile takeover of Spirit Airlines after Spirit rejected JetBlue’s $3.6 billion offer in favor of an existing deal with Frontier Airlines.
JetBlue responded to the rejection by offering $30 a share to Spirit, making the purchase price more than $3.2 billion. JetBlue said it was willing to increase its all cash offer in order to win over Spirit.
The offer caused Spirit’s stock price to go up 8% at closing of the stock exchange on Friday. A June 10 vote is scheduled to decide whether Spirit will merge with Frontier or consider JetBlue’s offer.
Meanwhile, Frontier is suffering from its intention to merge with Spirit – its stock price fell by a third, devaluing its bid.
The three-way deal shuffle has drawn more interest to the deal, and has the Biden administration concerned about industry competition and antitrust issues. JetBlue is already facing an antitrust lawsuit by the Justice Department due to its relationship with American Airlines.
JetBlue wants to merge with Spirit and expand its presence and ability to compete with larger airlines, such as American Airlines.
“It’s unlikely the DOJ or a court will be persuaded that JetBlue should be allowed to form an anticompetitive alliance that aligns its interest with a legacy carrier and then also undertake an acquisition that would eliminate the largest ULCC carrier,” Spirit’s chairman, Ted Christie, said on a call to investment analysts in May.
JetBlue said it is willing to negotiate and change its plans in regard to American Airlines, in order to be in compliance with regulations.
Frontier says it will not agree to pay a “breakup fee” if the proposed merger fails due to antitrust regulations. Spirit could get $200 million from JetBlue if the deal falls through.
Which airline will Spirit choose to merge with? Combining with Frontier, the pair would control over 8% of the flight market. Merging with JetBlue could have a better financial outcome, with the two dominating more than 10% of the market.
Also, JetBlue is offering all cash.
Spirit also has a relationship with Indigo Partners, a private investment firm that invests in budget airlines. Indigo has a controlling interest in Frontier as well, complicating the love triangle.
According to financial analysts, Frontier’s deal could be more advantageous to stockholders than the JetBlue deal. However, some analysts have stressed that the JetBlue/Spirit merger would provide huge competition to large airlines like American, and make fares more attractive to travelers.
