Shares of budget U.S. carrier Spirit Airlines fell 8% on Monday after it rejected a hostile offer from midmarket rival JetBlue Airways . Spirit is sticking with friendly suitor Frontier's $2.4 billion offer, even though JetBlue’s all-cash offer is now worth 50% more than Frontier’s largely stock-based proposal.
Spirit's position assumes that Washington's anti-merger stance is essentially immovable, doomingJetBlue's hostile pursuit to failure. At some point, though, Spirit shareholders might start to find the bet appealing. If JetBlue's bid succeeded, they would get a much higher price; if not, Spirit could pocket a break fee from JetBlue worth over 8% of Spirit's current market capitalization and still potentially go back to Frontier.
The question is whether that short-term calculus is enough to outweigh longer-term disruptions that could haunt a broken deal, including the risk that Frontier's offer will no longer be on the table.
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