What happened
The latest development in the saga that is the proposed acquisition of Spirit Airlines (SAVE -0.12%) by peer JetBlue Airways (JBLU 5.13%) gave the former company's investors hope on Wednesday. Specifically, this was the reassignment of a government lawsuit on the deal to a new judge. The market reacted by bidding Spirit's stock up a chunky 4.5% on the day.
So what
The lawsuit, which has been filed by the Justice Department on antitrust grounds, will be presided over by U.S. District Judge William Young in Boston. What's encouraging for Spirit investors is that Young has a reputation for speeding lawsuits to trial. This promises a relatively fast resolution to the matter, as opposed to a tough, dragged-out, and exhausting legal fight.
On Tuesday, Justice, together with the states of Massachusetts and New York, plus the District of Columbia, filed its antitrust lawsuit. It alleges, "By eliminating that competition and further consolidating the United States airlines industry, the proposed transaction will increase fares and reduce choice on routes across the country, raising costs for the flying public and harming cost-conscious fliers most acutely."
In July 2022, Spirit agreed to the deal, in which JetBlue would acquire the budget airline for $33.50 per share in an all-cash acquisition. The deal's equity value is $3.8 billion.
Now what
JetBlue in particular has signaled that it is willing to compromise, so perhaps the smart money is betting on a resolution in favor of the acquisition. Yet it isn't safe to assume the two companies will prevail, particularly when facing off in court against determined state and federal governments with vast resources.
With all this in mind, investors should be cautious here.
