Ultra-low-cost carrier Spirit Airlines (SAVE-US) on Monday rejected a $33-a-share takeover offer from JetBlue Airways Corp (JBLU-US), citing a high likelihood of government regulatory approval Low.
In response, JetBlue raised its offer; it didn’t raise its $33-per-share offer, but promised to pay a reverse breakup fee of $200 million, or $1.80 per Spirit share, if the deal didn’t go through for antitrust reasons.
JetBlue’s offer is significantly higher than Frontier’s (ULCC-US) offer of $22.44 per share in cash and stock in February.
Frontier and JetBlue are vying for Spirit to better compete with traditional airlines or the “Big Four” airlines that control nearly 80 percent of the U.S. passenger market.
The Justice Department and six states filed a lawsuit in September to unwind the Northeast Alliance (NEA) partnership between JetBlue and American Airlines (AAL-US), claiming the deal would lead to higher fares at busy Northeastern U.S. airports .
In a letter to JetBlue CEO Robin Hayes on Monday, Spirit Airlines said, “We believe that as long as the JetBlue-American NEA remains in place, it is highly unlikely that the merger of JetBlue and Spirit Airlines will receive antitrust clearance. “
JetBlue said on Monday that it would offer a remedy to the regulatory issue, “including spinning off all Spirit assets in New York and Boston so JetBlue doesn’t add to NEA-covered airports. The package would also include gate and other airports. assets, including Fort Lauderdale.”
Spirit said it believed the Justice Department and courts “would be very concerned that a high-cost, high-fare airline would eat up a low-cost, low-fare airline, which would eliminate roughly half of the U.S. ultra-low-cost carriers ( ULCC) capacity.”
In its April 25 response to JetBlue, Spirit said it “requests JetBlue to take any action necessary to obtain regulatory clearance, which includes, in particular, a waiver of the NEA.”
Spirit added: “Given this significant risk, we believe JetBlue’s economic offer is illusory and Spirit’s board does not believe it is necessary to consider it.”
