Spirit Airlines stock jumps on report of rival bid from JetBlue (NYSE:SAVE)

Update 9:35pm: Adds Frontier comment.

Update 4:53: Add JetBue confirming offer.

Update 4:30pm: Adds Spirit Airlines statement confirming JetBlue bid.

Spirit Airlines rose 22% after JetBlue (NASDAQ:JBLU) offered $3.6 billion, or $33/share for the airline. JetBlue fell 7%.

The offer is a roughly 40% premium to the Frontier’s (NASDAQ:ULCC) cash and share offer for Spirit (NYSE:SAVE) from February, which has an implied valued of about $23/share, according to an earlier NY Times report. Frontier shares rose 4%.

Spirit’s (SAVE) board will work with its financial and legal advisors to evaluate the JetBlue (JBLU) offer and pursue what’s in the best interest of Spirit and its holders, according to a statement. JetBlue also confirmed its offer in a press release.

“Customers shouldn’t have to choose between a low fare and a great experience, and JetBlue has shown it’s possible to have both,” Robin Hayes, JetBlue CEO, said in the statement.

The offer comes after Frontier Airlines (ULCC) agreed to buy Spirit Airlines (SAVE) for about $2.9 billion in stock and cash in February. Frontier and Spirit expected to deliver annual run-rate operating synergies of $500M.

Under the terms of the SAVE/ULCC deal, Spirit (SAVE) equity holders are expected to receive 1.9126 shares of Frontier (ULCC) plus $2.13 in cash for each existing Spirit share they own. The deal was expected to close in the second half of 2022.

Frontier (ULCC) said a combination of JetBlue and Spirit would raise fares and limit flight options, Bloomberg reported, citing an email from the airline. Frontier didn’t say whether it planned to raise its offer for Spirit.

“An acquisition of Spirit by JetBlue, a high-fare carrier, would lead to more expensive travel for consumers,” Frontier said in in the email.

JetBlue (JBLU) said its proposed deal with Spirit Airlines (SAVE) is expected to deliver $600-700 million in net annual synergies. The combined airline is projected to have annual revenues of approximately $11.9 billion based on 2019 revenues. JetBlue expects the transaction to be accretive to earnings per share in the first full year, excluding integration costs.

The combination of the two low cost carriers has already drawn some criticism on the antitrust front, with legislators, including Sen. Elizabeth Warren (D-MA), calling on the Dept. of Justice to further investigate the deal to see if it harms competition.

A combination of JetBlue and Spirit Airlines may also be potentially problematic as far as antitrust concerns, especially in the Florida market due to overlaps in cities such as Orlando and Fort Lauderdale, according to media reports including CNBC.

JetBlue’s said it expects a definitive agreement with Spirit (SAVE) would address any regulatory concerns, including a “reverse break-up fee” that would become payable to Spirit in event the proposed transaction is not consummated for antitrust reasons.

Recall February, Spirit Airlines CEO: Combination with Frontier is ‘not a regular airline merger.’