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Spirit Airlines and JetBlue Merger – Deal Postmortem

  • April 24, 2024

It usually takes a merger four months from the date of announcement to closure. In 95% of cases, deals with a definitive merger agreement are successfully consummated but the remaining 5% are the reason that merger arbitrage is also known as risk arbitrage. We are reminded of the risk in risk arbitrage as we write this tonight with the FTC deciding a few hours ago to sue to block the merger of luxury goods company Capri (CPRI) with Tapestry (TPR), the company that owns brands like Coach and Kate Spade.

In a few cases, companies have to navigate through stormy skies to reach their goal, and one such company that succumbed to this turbulence was Spirit Airlines. Just like we did with iRobot (IRBT) two months ago, this is our second deal postmortem. The goal of this series of articles is to provide investors with a play-by-play of how failed deals unfolded over a period of months or even years (the saga to acquire the insurance company Genworth Financial lasted four years). Deal postmortems combined with a list of all failed mergers over the last 13 years, will hopefully help arbitrageurs identify patterns and improve their odds of success with this strategy.

In the context of how the acquisition of Spirit Airlines by JetBlue (JBLU) played out, the company’s stock symbol “SAVE” was a red herring, a cry for help, a warning of impending doom.

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