After agreeing to merge earlier this year with Frontier Airlines (NASDAQ:ULCC), Spirit Airlines (NYSE:SAVE) yesterday received a competing takeover bid from JetBlue (NASDAQ:JBLU). All three companies are known as discount airlines. JBLU stock fell 7% yesterday and is dropping another 8% today in early trading.
JetBlue is offering $33 per share of cash, or $3.6 billion, for Spirit. On Feb.7, Frontier announced that it would provide the owners of Spirit’s stock with 1.9126 Frontier shares and $2.13 of cash for each share of Spirit that they own.
According to CNBC, at the time, the deal valued SAVE stock at $25.83 per share.
Responding to JetBlue’s offer, Spirit said that its board would consider the proposal and ultimately pursue whatever is best for itself and the owners of SAVE stock.
Analysts Are Unimpressed With the JBLU Stock News
Several Wall Street analysts were somewhat bearish on JetBlue and Spirit in the wake of the news. Bank of America questioned whether JetBlue could convince regulators to approve the proposed acquisition. The firm also wondered about the cost of adapting Spirit’s planes to JetBlue’s fleet, and was worried about JetBlue’s ability to cut its debt in the wake of the combination.
Evercore ISI cut its rating on Spirit to “in-line” from “outperform,” as the firm doubts whether a higher offer for the airline will emerge. It added that it does not expect regulators to quickly approve whichever deal Spirit chooses.
Raymond James cut its rating on JBLU stock to “market perform” from “outperform.” For its part, MKM Partners suggested that regulators would mount “significant pushback” to JetBlue’s proposal, partly because both Spirit and JetBlue have many routes in the eastern U.S.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
