Spirit Airlines (NYSE:SAVE) stock is up nearly 10% today on news that JetBlue Airways (NASDAQ:JBLU) has launched a hostile takeover bid for the discount carrier.
JetBlue’s all-cash takeover offer for Spirit Airlines comes two weeks after Spirit rejected a $33-per-share offer from its larger rival.
Spirit has already agreed to merge with Frontier Group (NASDAQ:ULCC). Prior to today, SAVE stock had fallen 25% year to date to trade at $16.98 a share.
What Happened With SAVE Stock
In a letter to SAVE stock holders, JetBlue offered $30 a share and said it was willing to consider $33 per share after completing its necessary due diligence on Spirit Airlines. A price of $30 a share would represent a 77% premium from May 13.
Beyond its pending merger, Spirit Airlines said its reason for rejecting JetBlue’s previous offer was that its board of directors felt that the combination of the two carriers would not win regulatory approval in the U.S.
JetBlue has filed a “Vote No” proxy statement urging Spirit shareholders to vote against the planned merger with Frontier Group.
Why It Matters
Spirit shareholders will vote June 10 on its proposed merger with Frontier. That deal now looks to be in jeopardy as JetBlue makes an aggressive bid for Spirit Airlines.
JetBlue said that it wants to acquire Spirit Airlines in order to help it better compete with the “Big Four” U.S. airlines that control about 80% of the domestic market. The company is trying to gain market share as the airline industry emerges from the pandemic downturn.
JetBlue is the sixth-largest U.S. passenger carrier and does not see the regulatory threats that Spirit fears It has promised a $200 million reverse break-up fee if the deal does not go through.
What’s Next for Spirit Airlines
The drama to acquire Spirit Airlines continues, and the beneficiaries are SAVE shareholders. Should JetBlue succeed in acquiring Spirit Airlines, shareholders of Spirit will receive a substantial premium for the stock they hold.
In the meantime, the prospect of JetBlue and Frontier Group fighting over Spirit Airlines is enough to send SAVE stock sharply higher, also benefitting shareholders.
On the date of publication, Joel Baglole 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.