This shouldn’t come as a lot of a shock, but it surely appears just like the merger between JetBlue and Spirit might face some regulatory points sooner fairly than later. A couple of weeks in the past there have been rumors that this could possibly be occurring within the not-too-distant future, and Bloomberg is now reporting that it might occur as early as this week.
DOJ will file lawsuit to dam JetBlue & Spirit merger
The Division of Justice (DOJ) is predicted to shortly file a lawsuit to dam the merger between JetBlue and Spirit. Based on sources, this might occur as quickly as this week, although after all that’s topic to alter.
Federal antitrust regulators have been busy below the Biden Administration, in the identical means that we’re seeing the DOJ at the moment difficult the American and JetBlue Northeast Alliance (no closing choice has been made there but).
As a reminder, the $3.8 billion merger between JetBlue and Spirit was introduced in July 2022. It was fairly a tough street to even get to that time, since in February 2022 it was introduced that Frontier and Spirit would merge.
JetBlue did every thing it might to dam that, together with trying a hostile takeover, and that labored. The merger plans between Frontier and Spirit have been terminated simply shortly earlier than the JetBlue deal was introduced.
JetBlue & Spirit have been anticipating DOJ scrutiny
Needless to say simply because the DOJ plans to problem this merger doesn’t imply it gained’t find yourself occurring. One seemingly final result is that some concessions will should be made for the merger to be accepted, whether or not it’s giving up slots at sure airports, committing to a specific amount of presence in some markets, and so forth. As a matter of reality, it might have been stunning if the merger have been accepted with none challenges.
Clearly JetBlue and Spirit have been anticipating this, and that’s one of many causes that the merger between Frontier and Spirit was initially favored. When the JetBlue merger was introduced, the plan was just for the deal to shut within the first half of 2024, reflecting how lengthy of a street this might be.
For that matter, Spirit’s inventory worth clearly displays concern over this deal being accepted. The deal requires JetBlue buying Spirit for $33.50 per share in money. At present Spirit’s inventory worth is round half of that, which is a direct reflection of this concern.
My tackle the DOJ difficult the JetBlue & Spirit merger
I’m torn on this.
On the one hand, I don’t suppose the merger between JetBlue and Spirit might be good for competitors. JetBlue and Spirit each carry one thing distinctive to the market, and I worth each airways. However I’m undecided they’re nice collectively. It’s just like how I like ice cream and I like pizza, however I don’t need pizza flavored ice cream. This merger would go away Frontier and Allegiant as the one main extremely low price provider in america.
However, blocking a merger between JetBlue and Spirit looks like an arbitrary place to attract a line. Previously 15 years we’ve seen mergers between the largest airways within the US, with regulators dong virtually nothing. The time to dam issues would have been again then, after we noticed the formation of recent day American, Delta, and United.
However to now out of the blue block a merger that might result in an airline that can nonetheless be considerably smaller than the “large 4” looks like an odd place to start out. This additionally displays the completely different approaches taken by completely different administrations.
Backside line
Not surprisingly, the Division of Justice is planning to file a lawsuit over the JetBlue and Spirit merger, and it might occur as quickly as this week. The Biden Administration is taking a more durable stance in terms of antitrust issues, and this displays that.
It stays to be seen if something comes of this. The most certainly final result, as I see it, is that some concessions should be made. The worth of this deal appeared marginal to start with, and this might solely make the worth proposition even worse.
What do you make of the DOJ submitting swimsuit over the JetBlue and Spirit merger?