JetBlue to Buy Spirit Airlines for $3.6 Billion

JetBlue Airways is planning to buy Spirit Airlines Inc for almost $3.6 billion. The company offered to buy Spirit in an all-cash transaction for $33 a share. 

Another ultra-low-cost airline, Frontier Group Holdings Inc, announced in February a deal to buy Spirit for $2.9 billion in cash and stock-a deal that would transform the two discounters into the fifth largest airline in the United States.

JetBlue claims that its proposal would be a better opportunity for Spirit investors and that its offer represented a 37% premium to the value implied by the Frontier proposal. But under Frontier’s proposal, Spirit’s existing shareholders would retain a 48.5% stake in the combined company. 

JetBlue was previously looking for strike deals as it aimed at a bigger national footprint to compete against the big four airlines that dominate the airline industry. JetBlue tried to buy Virgin America, but in 2016 it lost to Alaska Air Group Inc.

If JetBlue acquires Spirit Airlines, it would be able to grow more quickly in South Florida and make incursions into hubs that contain larger carriers' control, including Dallas, Houston, Chicago and Atlanta, the airline said. It would also open up new opportunities for JetBlue to enter new markets like Memphis and Louisville.

While Spirit and Frontier are known for their rock-bottom fares and billing rates, JetBlue offers benefits such as Business Class and free Wi-Fi differences that the executives at JetBlue acknowledge in a memo to its employees.