Spirit Airlines Rejects JetBlue Despite Enhanced Offer

Spirit Airlines this morning rejected a takeover bid by JetBlue Airways – despite an enhanced offer from JetBlue – saying it doesn’t believe the offer would survive scrutiny from the Department of Justice and other government regulators, according to CNBC and other media outlets.

Spirit earlier this year had verbally agreed to a merger with fellow ultra low-cost carrier Frontier Airlines while its board did its due diligence.

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In early April, JetBlue flew in and shocked the aviation industry with a surprise offer to buy Spirit in an all-cash deal that was $700 million more than Frontier’s offer.

But Spirit pointed to the lawsuit filed by the DOJ and six states challenging JetBlue’s Northeast Alliance with American Airlines, saying that agreement – which regulators allege would like to higher fares in the northeast – would serve as a major roadblock to a Spirit-JetBlue merger.

“We believe a combination of JetBlue and Spirit has a low probability of receiving antitrust clearance so long as JetBlue’s Northeast Alliance (NEA) with American Airlines remains in existence,” Spirit said in a letter to JetBlue Chief Executive Robin Hayes this morning.

JetBlue responded by telling Spirit it would add a divestiture commitment to the offer, a reverse break-up fee, and enhanced structures to “remedy” any concerns about NEA with American.

But JetBlue declined to scrap its alliance with American, nor did it enhance its cash offer of $33 a share, saying it was still a superior offer to Frontier’s.

Spirit was not swayed.

“We struggle to understand how JetBlue can believe DOJ, or a court, will be persuaded that JetBlue should be allowed to form an anticompetitive alliance that aligns its interests with a legacy carrier and then undertake an acquisition that will eliminate the largest ULCC carrier,” Spirit wrote in its letter. “JetBlue is unwilling to terminate the NEA – or to agree to any other remedies that might materially decrease the expected benefits to JetBlue from the NEA – to obtain clearance for an acquisition of Spirit.”