Spirit Airlines (SAVE) shares surged higher Tuesday after JetBlue (JBLU) improved its takeover bid for the low-cost carrier to around $3.65 billion as it looks to elbow-out an agreed merger with Frontier Group Holdings (ULCC).
JetBlue boosted its cash offer for Spirit to $33.50 per share on Monday, pledging to distribute around $1.50 of that to shareholders immediately upon completion of the deal. JetBlue has also pledged to boosts its 'reverse breakup fee' to around $350 million in the event that antitrust authorities fail to approve the merger.
That risk appears likely, given that the The Justice Department has already filed a lawsuit against JetBlue's northeast alliance with American Airlines (AAL), a tie-up the carrier says will remain in place if its allowed to complete its takeover of Spirit.
"The Spirit Board of Directors will work with its financial and legal advisors to evaluate JetBlue's revised proposal and pursue the course of action it determines to be in the best interests of Spirit and its stockholders," the group said in a statement.
"Spirit is continuing to engage in discussions with JetBlue and is continuing to work with Frontier under the terms of the existing merger agreement between Spirit and Frontier," the statement added. "As part of this process, Frontier and JetBlue have been given access to the same extensive due diligence information, on the same terms."
Spirit Airlines shares were marked 6.5% higher in early Tuesday trading to change hands at $22.70 each. Frontier jumped 1.1% to $9.44 each while JetBlue edged 0.8% lower to $8.48 each.
Frontier's $19.99 per share bid for Spirit, while notably shy of the sweetened $33.50 level proposed by JetBlue, carries fewer antitrust risks and is considered a "superior proposal' by the Spirit board of directors.
Still, both Spirit's tie-up with Frontier, first unveiled in early February, as well as any potential takeover by JetBlue would likely face significant regulatory hurdles and a close look from the Department of Justice on the grounds that it could raise fares and limit customer choice.
In late March, a group of lawmakers lead by Senators Elizabeth Warren and Bernie Sanders telling regulators the deal would "consolidate market power for the airlines and reduce choices for travelers."
