JetBlue Airways reached an agreement to buy Spirit Airlines to create the fifth largest carrier in the country as the deal was consummated after a planned merger between Spirit and Frontier Airlines fell through.
The Queens-based JetBlue has agreed to pay $33.50 a share in cash for Spirit as part of a $3.8 billion deal.
The deal is still pending approval by regulators.
Shares of JetBlue were up by more than 1% in premarket trading on Thursday morning while Spirit’s stock soared by more than 4%.
Frontier, which will now be the largest discount airline in the country, saw its share price rise by some 1.5% in premarket trading.
The $33.50 per share offer price is a premium of almost 38% of the most recent closing price of Spirit stock.
The deal includes a so-called “ticking fee,” which is a small monthly payment to Spirit shareholders beginning in January. The payments will continue until the deal is officially completed.
JetBlue and Frontier were locked in a bidding war to create a merged airline that would compete with larger, legacy carriers as the industry faces severe labor shortages, higher energy costs, and surging demand.
In February, Spirit agreed to a $2.9 billion buyout offer from Frontier. Two months later, however, JetBlue launched its own takeover bid of Spirit.
While JetBlue made the higher offer, Spirit preferred to merge with Frontier in order to avoid potential antitrust issues.
But Spirit shareholders would not sign off on the Frontier deal, forcing the merger’s cancellation.