Huge merger: Jet Blue is expected to purchase Spirit Airlines for $3.8 billion
After months of negotiations and attempts to merge Spirit with another airline, Frontier, the low-cost carrier from New York announced that it had agreed on the outline of the deal. However, it is possible that the federal government will try to prevent the move
The American airline Jet Blue Airways announced earlier this week that it intends to acquire the ultra-low-cost giant Spirit Airlines, just hours after it canceled its merger plans with another company.
Illustration (photo: Shutterstock)
Jet Blue’s announcement stated that it has reached an agreement on the purchase outline, and will pay $3.8 billion for the purchase of Spirit – an amount equal to $33.50 for each share.
As you may remember, at the beginning of the year it became known that Spirit intends to sign a merger agreement with another airline, Frontier Airlines, but since then it has encountered many difficulties in completing the deal. If Spirit’s acquisition is approved, the new company (which will likely merge under the JetBlue brand) will become the fifth largest in the United States, and Frontier will remain the largest ultra-low-cost carrier in the United States.
In fact, already in April we reported that Jet Blue submitted a purchase offer of $3.6 billion (in the framework of which Jet Blue’s leaders agreed to pay $33 for each Spirit share).
Last May, Spirit officially announced it was rejecting the offer, a move that led to JetBlue making another offer. Instead of paying more, Jet Blue offers to complete the deal in the current outline (as mentioned, a payment of $33 for each share of the company), and added a ‘bonus’ of $200 million ($1.80 per share) to be paid if the government fails the deal.
Illustration (Photo: Getty Images)
The fight for Spirit Airlines, which has been run by Jet Blue and Frontier for many months, stems from the desire of the two airlines to compete better with the “big four” in the field – United, Delta, American and the low-cost giant Southwest.
The decision by Spirit bosses to reject Jet Blue’s offer was made on the assumption that the federal government would block the move. Among other things, this hypothesis stems from the fact that the Ministry of Justice is already working to break up the “Airline Alliance Agreement” signed by Jet Blue and American Airlines.
In recent months, senior officials in the Biden administration have said that they will continue to oppose mergers and acquisition agreements of this type, and this is against the background of the fact that in the last two decades, 11 airlines in the United States have merged and become the ‘big four’ – which today fly approximately 80% of all passengers in the United States.
That is, even though Jet Blue and Spirit agreed on the purchase, the administration is expected to demand from the court to prevent the move.
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