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Summary Question"JetBlue to Launch Tender Offer for Spirit, Urge Shareholders to Vote Against Fron $7.99   Add to cart

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Summary Question"JetBlue to Launch Tender Offer for Spirit, Urge Shareholders to Vote Against Fron

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JetBlue to Launch Tender Offer for SpiritQuestion"JetBlue to Launch Tender Offer for Spirit, Urge Shareholders to Vote Against Frontier Deal"Links to an external site.Unit 2 DQ Question: What are Spirit's concerns regarding JetBlue's offer? Why do you think Spirit, Frontier, and...

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  • October 6, 2024
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"JetBlue to Launch Tender Offer for Spirit, Urge Shareholders to Vote Against

Frontier Deal"Links to an external site.


Unit 2 DQ Question:


 What are Spirit's concerns regarding JetBlue's offer?


 Why do you think Spirit, Frontier, and JetBlue's share prices performed as

they did on Monday?


 How and why has JetBlue structured a two-tier offer for Spirit (i.e., $30

per share and $33 per share)?


 Describe the events that led to JetBlue's decision to launch a hostile

takeover.


 How has JetBlue sought to respond to the concerns voiced by Spirit?




Answer & Explanation

,QUESTION 1.




The major concern regarding JetBlue's offer for Spirit Airlines is antitrust

regulators opposing the deal. Spirit feels that if it were to merge with JetBlue,

that would eliminate a low-fare player, which means higher prices for

consumers, a scenario that could draw objections from regulators.




Of particular concern, he said, were Spirit's concerns about JetBlue's alliance

with American Airlines in New York and Boston. That deal is already facing an

antitrust lawsuit from the Justice Department, and Spirit contends it would

create heightened regulatory hurdles for a deal with JetBlue.




It also questioned whether JetBlue would be able to secure regulatory clearance,

even after offering to sell assets and pay a breakup fee if the deal does not go

through. Spirit said the regulatory bar was so high that it could not properly

consider whether JetBlue's offer was superior to Frontier's.

, QUESTION 2.




Shares of Spirit Airlines surged 22% on Monday after JetBlue launched an

unexpected hostile bid, raising expectations among investors that the company

may be caught in a bidding war between JetBlue and Frontier Airlines. In most

cases, the share price of a company being ferreted out goes up at the possibility

of a bidding war—two acquirers looking into acquiring the same company. As

the acquirers tried to outmaneuver each other with the best possible deal,

investors knew that this kind of competition would only yield them a higher

price for the acquisition of shares in Spirit Airlines.




JetBlue's stock price reacted a little more moderately, with a 2.7% increase

following their announcement of a tender offer. There is always a risk in a

hostile takeover, but with it—likely perceptions of potential long-term benefits

to acquiring Spirit for the investors—other than managing to gain market share

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