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JetBlue (JBLU) Proposes $3.6B Deal to Acquire Spirit Airlines
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JetBlue Airways (JBLU - Free Report) has submitted a proposal to acquire Spirit Airlines (SAVE - Free Report) in a $3.6-billion deal, following which the latter’s shares jumped 22.4% at the close of business on Apr 5. JBLU shares declined 7.1% in yesterday’s trading. The proposal deals a blow to the previously announced merger agreement between Spirit Airlines and Frontier Group Holdings (ULCC - Free Report) .
While JetBlue is also a low-cost carrier, it is not an ultra-low-cost carrier like Spirit Airlines or Frontier Airlines. A possible deal between two companies with different operating structures raises concerns of higher fares. As it is, the Spirit Airlines-Frontier Airlines deal drew flak on the grounds that it could “further concentrate and even monopolise the ultra-low-cost carrier segment of the industry, rather than create a meaningful competitor.”
While JetBlue and Spirit Airlines carry a Zacks Rank #3 (Hold), Frontier carries a Zacks Rank #4 (Sell).
Frontier criticized JetBlue’s proposal, saying that it would reduce competition and limit travel options for customers. Defending its own proposal, ULCC said, that it “is in the best interest of consumers and shareholders and would deliver $1 billion in annual savings for consumers,” a Reuters report stated.
JetBlue’s $3.6-billion deal, equivalent to $33 per share in cash, represents a premium of 52% to Spirit Airlines’ undisturbed share price on Feb 4, 2022, and a premium of 50% to its closing share price on Apr 4, 2022. JBLU feels the proposal is “superior” to the Spirit Airlines-Frontier Airlines deal as it provides an attractive opportunity for SAVE’s shareholders. JBLU CEO Robin Hayes said, "Customers shouldn’t have to choose between a low fare and a great experience.”
Per JetBlue, combining the two airlines would create the fifth-largest domestic airline, giving tough competition to the big four U.S. carriers. The Spirit Airlines deal is expected to help JetBlue expand its footprint in New York and Florida. The merger will help JBLU expand across the United States, the Caribbean and Latin America. The combined entity would offer more than 1,700 daily flights to over 130 destinations in 27 countries.
The transaction is expected to generate $600-700 million in net annual synergies upon completion of integration. The combined company is predicted to generate annual revenues of approximately $11.9 billion (based on 2019 revenues). Excluding integration costs, the transaction is expected to be accretive to JetBlue’s earnings per share in the first full year.
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JetBlue (JBLU) Proposes $3.6B Deal to Acquire Spirit Airlines
JetBlue Airways (JBLU - Free Report) has submitted a proposal to acquire Spirit Airlines (SAVE - Free Report) in a $3.6-billion deal, following which the latter’s shares jumped 22.4% at the close of business on Apr 5. JBLU shares declined 7.1% in yesterday’s trading. The proposal deals a blow to the previously announced merger agreement between Spirit Airlines and Frontier Group Holdings (ULCC - Free Report) .
While JetBlue is also a low-cost carrier, it is not an ultra-low-cost carrier like Spirit Airlines or Frontier Airlines. A possible deal between two companies with different operating structures raises concerns of higher fares. As it is, the Spirit Airlines-Frontier Airlines deal drew flak on the grounds that it could “further concentrate and even monopolise the ultra-low-cost carrier segment of the industry, rather than create a meaningful competitor.”
While JetBlue and Spirit Airlines carry a Zacks Rank #3 (Hold), Frontier carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
JetBlue Airways Corporation Price
JetBlue Airways Corporation price | JetBlue Airways Corporation Quote
Frontier criticized JetBlue’s proposal, saying that it would reduce competition and limit travel options for customers. Defending its own proposal, ULCC said, that it “is in the best interest of consumers and shareholders and would deliver $1 billion in annual savings for consumers,” a Reuters report stated.
JetBlue’s $3.6-billion deal, equivalent to $33 per share in cash, represents a premium of 52% to Spirit Airlines’ undisturbed share price on Feb 4, 2022, and a premium of 50% to its closing share price on Apr 4, 2022. JBLU feels the proposal is “superior” to the Spirit Airlines-Frontier Airlines deal as it provides an attractive opportunity for SAVE’s shareholders. JBLU CEO Robin Hayes said, "Customers shouldn’t have to choose between a low fare and a great experience.”
Per JetBlue, combining the two airlines would create the fifth-largest domestic airline, giving tough competition to the big four U.S. carriers. The Spirit Airlines deal is expected to help JetBlue expand its footprint in New York and Florida. The merger will help JBLU expand across the United States, the Caribbean and Latin America. The combined entity would offer more than 1,700 daily flights to over 130 destinations in 27 countries.
The transaction is expected to generate $600-700 million in net annual synergies upon completion of integration. The combined company is predicted to generate annual revenues of approximately $11.9 billion (based on 2019 revenues). Excluding integration costs, the transaction is expected to be accretive to JetBlue’s earnings per share in the first full year.