Spirit Airlines, Inc. is a major American ultra-low-cost carrier headquartered in Miramar, Florida, in the Miami metropolitan area. Spirit operates scheduled flights throughout the United States and in the Caribbean and Latin America. In this blog/video, we review the arbitrage situation surrounding Spirit Airlines (SAVE). Frontier Group and JetBlue Airways are competing with each other to take over Spirit Airlines. We also discuss the 4 questions that Warren Buffett uses to evaluate arbitrage situations. The numbers below are as of June 12, 2022.
Offer from Frontier Group Holdings, Inc. (ULCC): 1.9126 ULCC shares * $9.92/share + $2.13 cash / share = $21.10 / share.
Offer from JetBlue Airways Corporation (JBLU): $31.5 cash / share.
Reverse Breakup Fee:
From Frontier Group Holdings, Inc. (ULCC): $2.3/share.
From JetBlue Airways Corporation (JBLU): $3.22/share.
Warren Buffett’s 4 questions to evaluate arbitrage situations:
1) How likely is it that the promised event will indeed occur?
2) How long will your money be tied up?
3) What chance is there that something still better will transpire – a competing takeover bid?
4) What will happen if the event does not take place because of anti-trust action, financial glitches, etc.?
Useful Resources here.
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