JetBlue-Spirit Merger Officially Called Off, Impacting Stocks
The proposed merger between JetBlue Airways and Spirit Airlines has officially been terminated, triggering a significant impact on their stock values. JetBlue shares initially rose but ultimately gave up their gains, while Spirit stock plummeted by more than 10%.
This decision comes after a federal judge halted the merger in January, siding with the Justice Department‘s argument that it would harm budget-conscious travelers who rely on Spirit’s affordable fares. Although both airlines appealed the ruling and had scheduled arguments to be heard in June, their announcement on Monday clarified that regulatory obstacles made it impossible to close the transaction within the July 24 deadline.
Although the chances of a successful appeal were slim and diminished over time, this news provides closure for both companies and investors, eliminating any lingering hope of completing the merger.
JetBlue investors had long been against the merger, as the original offer of $33.50 per share for Spirit seemed excessive in retrospect. Spirit’s stock was trading around $15 prior to the court ruling in January, following a series of disappointing earnings reports.
Even if the merger had been approved, JetBlue may have sought to renegotiate the price, considering the change in circumstances.
In light of this outcome, JetBlue is now looking ahead and strategizing for a future without Spirit. The airline aims to reduce costs and restore profitability. Its shares had already climbed 17% in 2024, partly due to news that activist investor Carl Icahn had acquired a 9.9% stake in the company and secured two board seats.
Spirit’s recent struggles had played a significant role in boosting hopes for the merger, so the stock took a significant hit, dropping 11% to $5.77 during early trading.
JetBlue will compensate Spirit with $69 million, resolving all outstanding issues between the two carriers. JetBlue CEO Joanna Geraghty expressed belief in the merger’s potential, stating that it “would have unleashed a national low-fare, high-value competitor to the Big Four airlines.”
Spirit CEO Ted Christie expressed disappointment at failing to close the deal, highlighting how it would have saved money for consumers and provided a challenge to United Airlines, Delta Air Lines, American Airlines, and Southwest Airlines. Nevertheless, Christie remains optimistic about their future as an independent airline, wishing JetBlue success in their endeavors.
Analyst comment
Negative news. The termination of the JetBlue-Spirit merger has had a significant impact on their stock values, with JetBlue shares initially rising but ultimately giving up gains, and Spirit stock plummeting by over 10%. The decision provides closure but eliminates any hope of completing the merger. JetBlue will now focus on reducing costs and restoring profitability, while Spirit remains optimistic about their future as an independent airline.
