JetBlue Reluctant to Quit Spirit Airlines’ Buyout Race

JetBlue Airways Corporation (NASDAQ: JBLU) is determined to bring Spirit Airlines, Inc. (NYSE: SAVE) under its wings, as it has urged the latter’s shareholders to vote against the offer made by Frontier Group Holdings, Inc. (NASDAQ: ULCC).

Scaling high on the matter, JetBlue has also initiated a tender offer for the shares of Spirit Airlines, with the hostile-takeover price fixed at $30 per share. This offer represents a 60% hike over the offer made by Frontier Group (as of May 13).

Adding more spice to the whole scenario, JetBlue noted that a transaction at $33 per share is also possible if Spirit Airlines decides to share vital diligence information with the former.

In a letter to Spirit Airlines’ shareholders, JetBlue’s CEO Robin Hayes said, “JetBlue offers more value – a significant premium in cash – more certainty, and more benefits for all stakeholders. Frontier offers less value, more risk, no divestiture commitments, and no reverse break-up fee, despite more overlap on non-stop routes and their own regulatory challenges.”

Shares of JetBlue were down 1.6% in the pre-market trading session on Monday, at the time of writing, while shares of Spirit Airlines and Frontier Group were up 14.8% and 4.5%, respectively.

Going Back in Time

On February 7, 2022, Spirit Airlines and Frontier Group agreed to combine the two business fronts into one. For every Spirit share, shareholders were promised $2.13 in cash and 1.9126 Frontier shares.

Upon completion, Frontier was anticipated to hold 51.5% of the combined business.

On April 5, 2022, JetBlue proposed to buy each share of Spirit Airlines for $33 in cash.

On May 2, 2022, the board of directors of Spirit Airlines supported the deal offered by Frontier Group. Meanwhile, to allure Spirit Airlines, JetBlue added more features to its existing cash offer.

Wall Street’s Take

A few days ago, Duane Pfennigwerth of Evercore ISI reiterated a Hold rating on JBLU while lowering the price target to $13 (29.22% upside potential) from $15.    

Overall, the Street has a Hold rating on JBLU, which is based on five Buys, five Holds, and two Sells. JBLU’s price forecast of $14.60 suggests upside potential of 45.13% from current levels. Over the past year, shares of JetBlue have plunged 49.47%.

Crowd Wisdom

As per TipRanks, investor sentiment is currently Negative on JBLU, as 1.3% of investors on TipRanks have decreased their exposure to the stock in the past 30 days.

Conclusion

Until the company’s quest to acquire Spirit Airlines is successful, a wait-and-watch strategy seems to be the only prudent choice for investors interested in JetBlue.

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