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JetBlue Makes 3.6 Billion Bid for Spirit

The Offer

JetBlue is bidding $33 per Spirit share. This represents a premium of 52% to Spirit's undisturbed share price on Feb. 4, 2022, and a premium of 50% to Spirit's closing share price on April 4, 2022.

An undisturbed share price means the share price undisturbed by any indication of potential takeover-related activity.

Prior to the announcement, shares of Spirit had been trading around $22. On the morning of April 6, 2022, they were around $26.

The Rationale

JetBlue CEO Robin Hayes stated, in part: "Customers shouldn't have to choose between a low fare and a great experience, and JetBlue has shown it's possible to have both

The combination of JetBlue and Spirit—coupled with the incredible benefits of our Northeast Alliance with American Airlines [Group, Inc. (AAL)]

Would be a game changer in our ability to deliver superior value on a national scale.

Analysts Are Skeptical

UBS called the deal a "headscratcher." Bank of America noted that both JetBlue and Spirit use Airbus planes, but they struggle to find additional benefits for JBLU.

Raymond James downgraded JetBlue to market perform and said that product and labor would be tough to combine. Analyst Savanthi Syth wrote: 

The process is also likely to distract or possibly unwind current initiatives, most notably the Northeast alliance with American.

Moreover, the prospect of elevated debt, even if manageable, is likely to be an overhang on investor sentiment.

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