JetBlue, Spirit close to acquisition deal that could come Thursday – source

July 28 (Reuters) – JetBlue Airways Corp ( JBLU.O ) is nearing a deal to buy Spirit Airlines ( SAVE.N ) that could be announced as soon as Thursday, a source familiar with the matter said, after Spirit wrote off its $2.7 billion. sale to Frontier Group Holdings (ULCC.O).

The latest developments mark a victory for JetBlue in its months-long battle for the low-cost carrier, although the potential combination is expected to start a fight with antitrust regulators, who have already sued to block the alliance of JetBlue with American Airlines ( AAL.O ).

A combination of JetBlue and Spirit would create the fifth-largest U.S. airline and would be the biggest merger in the U.S. airline industry since Alaska Air Group ( ALK.N ) bought Virgin America Inc for $2.6 billion in 2016

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JetBlue is offering similar terms to what it had previously proposed, the source said. In June, JetBlue had offered $33.50 a share for Spirit, or roughly $3.7 billion, and a breakup fee of $400 million.

It will also maintain its Northeast Alliance (NEA) partnership with American, but is expected to announce divestments of minor routes to ease antitrust concerns, the source said.

The Wall Street Journal first reported the potential deal between JetBlue and Spirit.

Both JetBlue and Spirit did not respond to Reuters requests for comment outside regular business hours.

The source spoke on condition that they not be identified ahead of an official announcement of the deal.

Earlier Wednesday, Spirit canceled its sale to Frontier after failing to convince shareholders of its merits.

That development, first reported by Reuters, came after Spirit pushed back a shareholder vote on the Frontier deal four times, hoping it could muster enough support. Spirit had previously argued that antitrust regulators were unlikely to clear JetBlue’s $3.7 billion bid.

The result was a setback for Frontier and its president Bill Franke, who was instrumental in starting talks between the parties last year. Indigo Partners, Franke’s airline-focused buyout firm, is a major shareholder in Frontier.

“While we are disappointed that Spirit Airlines shareholders have not recognized the value and consumption potential inherent in our proposed combination, Frontier’s board took a disciplined approach,” Franke said in a statement.

JetBlue sees Spirit as an opportunity to expand its domestic footprint at a time when the U.S. airline industry is being hit by labor and aircraft shortages.

“We are pleased that the merger agreement with Frontier has been completed and are engaged in ongoing discussions with Spirit to reach a mutually agreed upon agreement as soon as possible,” JetBlue said in a statement.


But Spirit could also choose to remain independent.

The airline has expressed concern about JetBlue’s partnership with American. The US Justice Department filed an antitrust lawsuit against American and JetBlue in September to end the alliance, saying it would lead to higher fares at busy airports in the US Northeast.

JetBlue has refused to pull out of the alliance and has instead offered sweeteners like a higher breakup fee and route divestments.

Frontier shares rose 6.4% to close at $11.27 on Wednesday, as investors expressed relief that the company exited what had become a bidding war for Spirit. Spirit shares rose 4% to $24.30, while JetBlue shares rose 3.6% to $8.35.

With the end of the proposed Spirit-Frontier merger, Spirit will pay Frontier $25 million for the merger-related costs it incurred. Under the terms of the deal, Spirit would owe Frontier an additional $69 million if it ends up reaching a merger agreement with JetBlue or any other competitor in the next 12 months.

“Now that Spirit Airlines has terminated the Frontier merger agreement, we expect Frontier management to put aside the distraction of the merger and invest the same amount of resources and focus on improving conditions for their own airline.” , said the Frontier pilots union, which is a subset of the Airline Pilots Association (ALPA).

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Reporting by Anirban Sen and Greg Roumeliotis in New York Additional reporting by David Shepardson, Juby Babu in Bangalore Editing by David Gregorio and Muralikumar Anantharaman

Our standards: the Thomson Reuters Trust Principles.

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