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JetBlue bids for Spirit Airlines, potentially spoiling Spirit’s merger with Denver-based Frontier – The Denver Post

By Lauren Hirsch, Anupreeta Das and Niraj Chokshi, The New York Times

JetBlue Airways has made an offer to acquire Spirit Airlines for about $3.6 billion, three people with knowledge of the deal said, throwing a wrench in Spirit’s plan to merge with Frontier Airlines.

Spirit and Frontier, two budget carriers that operate largely nationally, had agreed to merge in early February in a deal the companies said would bring about $1 billion in annual savings to consumers. JetBlue offered $33 per share in cash, one of the people said. This price represents a premium of about 40% to Frontier’s cash and stock offer for Spirit, which has an implied value of about $23 per share at current prices.

Shares of Frontier have fallen more than 10% since shortly before the two airlines announced the agreement, reducing the value of its initial offer. Spirit’s board has yet to make a decision on which deal to make, one of the people said, but plans to carefully consider JetBlue’s offer.

Spirit and Frontier said that by merging they would make the aviation industry more competitive. The combined entity would become the country’s fifth-largest airline by market share, making it a stronger competitor to the four largest airlines, which control about two-thirds of the domestic market, they said. JetBlue is the sixth largest airline in the United States.

A merger of Spirit and Frontier makes sense given their overlapping business models and different regional strengths, according to industry analysts. Both were shaped by Indigo Partners, a private equity firm that invests in so-called ‘ultra low cost carriers’ – airlines with a strong focus on bottom line – and have been involved with both carriers.

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