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Spirit Airlines (SAVE) Stock Plunges as JetBlue Preps to Give Up

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Earlier this month, U.S. District Court Judge William Young ruled to block the proposed merger between Spirit Airlines (NYSE:SAVE) and JetBlue Airways (NASDAQ:JBLU). The Judge cited reduced competition risks and higher ticket prices for Spirit customers as part of his decision, among other factors. The decision came about a year and a half after JetBlue agreed to acquire Spirit for $3.8 billion in July of 2022.

“The Court rules that the proposed merger, as it stands, would substantially lessen competition in violation of the Clayton Act,” said the ruling. “The July 28, 2022 proposed merger, therefore, is enjoined.”

On Jan. 19, JetBlue announced that it and Spirit had filed a joint notice of appeal to the U.S. Court of Appeals for the First Circuit to argue in favor of the merger. SAVE stock received a boost on the news.

However, SAVE is plunging lower today following JetBlue’s submission of a Form 8-K, or a current event update.

SAVE Stock: JetBlue Prepares to Give Up on Merger

The 8-K stated that JetBlue had informed Spirit that it may be unable to satisfy certain conditions of the merger agreement between the two parties by the outside date. JetBlue also stated that the merger agreement could be terminated on or after Jan. 28.

“JetBlue continues to evaluate its options under the Merger Agreement. Unless and until such time as the Merger Agreement is terminated pursuant to its terms, JetBlue will continue to abide by all of its obligations under the Merger Agreement,” said JetBlue.

It appears that Spirit wasn’t very happy with the news and filed its own 8-K in response. “Spirit believes there is no basis for terminating the Merger Agreement. Spirit will continue to abide by all of its obligations under the Merger Agreement, and it expects JetBlue to do the same,” said the airline. Spirit’s response seems to be rushed, as the Judge blocking the merger is a major basis for terminating the agreement.

JetBlue is on the hook for several hundred million dollars if the merger is canceled due to antitrust regulatory provisions. Spirit would receive $70 million, while Spirit’s shareholders would receive $400 million less the approval prepayments that JetBlue had previously paid to Spirit’s shareholders.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

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