US sues to stop JetBlue’s deal for Spirit, cites consumer harm
WASHINGTON, March 7 (Reuters) – The U.S. Justice Department filed suit on Tuesday to stop JetBlue Airways Corp (JBLU.O) from buying Spirit Airlines Inc (SAVE.N), saying the planned $3.8 billion merger “will lead to higher fares and fewer seats, harming millions of consumers on hundreds of routes.”
Attorney General Merrick Garland said Spirit’s internal documents show that when it enters a market fares fall by 17% while JetBlue’s internal documents show that when Spirit stops flying a route, fares go up by 30%.
“The merger of JetBlue and Spirit would result in higher fares and fewer choices for tens of millions of travelers, with the greatest impact felt by those who rely on what are known as ultra-low-cost carriers in order to fly,” Garland told a news conference.
Spirit shares were up 3.8% on Tuesday afternoon at $16.98 after dipping the previous day on expectations of a lawsuit. JetBlue shares were down 0.5% at $8.36.
“We believe the DOJ has got it wrong on the law here and misses the point that this merger will create a national low-fare, high-quality competitor to the Big Four carriers which – thanks to their own DOJ-approved mergers – control about 80% of the U.S. market,” JetBlue CEO Robin Hayes said in a statement on Tuesday.
“There is too much at stake for the DOJ to prevent us from bringing the JetBlue difference to more customers in more markets,” he added.
The lawsuit is the latest attempt by the Biden administration to push back against further consolidation in certain industries.
“Companies in every industry should understand by now that this Justice Department will not hesitate to enforce our antitrust laws and protect American consumers,” Garland said.
The 39-page complaint, filed in Boston federal court, said the merger would “combine two especially close and fierce head-to-head competitors.” It called the deal “presumptively illegal.”
The Justice Department, whose lawsuit was joined by Massachusetts, New York and Washington, D.C., also said that JetBlue planned to remove 10% to 15% of seats from every Spirit plane.
“Fewer seats means fewer passengers – and higher prices for those who can still afford to make their way onto the plane. This is unlikely to stop business travelers flying on corporate expense accounts, but would put travel out of reach for many cost-conscious travelers,” the complaint said.
JetBlue has argued that the merger, which would create the fifth-largest U.S. carrier with a market share of 9%, was good for competition and would allow it to better compete with the big airlines.
The Transportation Department said on Tuesday it fully supports the lawsuit and plans to deny an exemption application asking the department to permit the carriers to operate under common ownership prior to the requested transfer.
U.S. Judge Leo Sorokin will hear the case. Sorokin also heard the Justice Department lawsuit in which the government asked the court to force JetBlue and American Airlines Group Inc (AAL.O) to scrap their Northeast Alliance. The companies are awaiting a decision after a trial last year.
Sorokin was nominated by then-President Barack Obama.
JetBlue had previously said it expected the deal for Spirit to close in early 2024, leaving time for litigation if necessary.
JetBlue prevailed in a months-long bidding war for Spirit Airlines after the ultra-low-cost carrier accepted its offer in late July.
From the beginning, JetBlue’s acquisition of Spirit had been expected to face a tough antitrust review because the four biggest carriers – American Airlines, United Airlines (UAL.O), Delta Air Lines (DAL.N) and Southwest Airlines (LUV.N) – control 80% of the U.S. domestic market.
JetBlue and Spirit have offered to sell Spirit’s holdings in Boston and New York, along with some assets in Florida, in a bid to ease the government’s antitrust concerns.
Florida Attorney General Ashley Moody on Monday resolved a state probe into the deal after the airlines agreed to increase seat capacity by at least 50% in both Fort Lauderdale and Orlando airports if the merger is completed.
Editing by Chris Sanders and Matthew Lewis
5 things to know before the stock market opens Tuesday – CNBC
1. Relief rally
UBS’ “shotgun wedding” with Credit Suisse might have done the trick, at least for now, as U.S. equities markets rallied Monday following the latest moves to shore up the global banking system. Now, Wall Street’s focus is almost entirely on what’ll come of the Federal Reserve’s policy-setting meeting, which kicks off Tuesday and concludes Wednesday. The money is still on a quarter-point rate hike, even though many are arguing for a pause on increases, given the recent banking sector tumult. At this point, though, markets are more likely to react to what the Fed and its chairman, Jerome Powell, say about what’s next in the central bank’s battle with inflation. Follow live markets updates.
2. First Republic’s last resort?
Yes, but what about First Republic? The regional bank – which, like Silicon Valley Bank, caters to clients with big, uninsured deposits – is teetering. Shares of First Republic are down about 90% this month after another brutal session Monday, even after 11 banks announced last week they were depositing a total of $30 billion with the bank. Now, JPMorgan Chase, which led that effort, is advising First Republic on strategic alternatives, including a capital raise, which would dilute shareholders, or even a sale, according to CNBC’s David Faber.
3. Pressure on Jassy
Amazon will lay off another 9,000 employees over the coming weeks, the company said. These cuts come on top of the 18,000 layoffs the e-commerce and cloud computing giant executed between November and January, and some market observers think there could be more to come. The decision is the latest difficult moment for CEO Andy Jassy, who took over from founder Jeff Bezos nearly two years ago. Over that time, Amazon’s shares have fallen 44%, as the company’s big gains during the lockdown era of the pandemic were wiped away while life started to return to normal. So while he’s now slashing costs, Jassy will face intense pressure to reignite growth, writes CNBC’s Annie Palmer.
4. Virgin Orbit’s existential crisis
Virgin Orbit seemed to have everything going for it. Name recognition. Wealthy backers. The excitement over a new space race fueled by private investment. Now it’s on the verge of bankruptcy. A filing could come as soon as this week as the company struggles to find a buyer, according to CNBC space reporter Michael Sheetz. And many of the company’s employees, from executives to engineers, are actively looking for new jobs. Virgin Orbit, which was spun out of Virgin Galactic, counts charismatic billionaire Richard Branson as its largest shareholder. After going public in December 2021 during the final stretch of the SPAC wave, its shares are now trading at around 50 cents a pop.
5. Xi and Putin strengthen their bond
Chinese President Xi Jinping and Russian President Vladimir Putin will hold a second day of meetings Tuesday in Moscow. The two leaders are working to increase ties between their two countries in the face of economic, diplomatic and military opposition from the west, led by the United States. Xi invited Putin to visit China some time this year, while the two are expected to sign a series of pacts and discuss cooperation over Russia’s war in Ukraine. Follow live war updates.
– CNBC’s Yun Li, Jesse Pound, David Faber, Annie Palmer, Michael Sheetz and Holly Ellyatt contributed to this report.
— Follow broader market action like a pro on CNBC Pro.
Liquidation sales at Nordstrom stores set to start Tuesday – Ottawa Citizen
The upscale department store chain has a store at the Rideau Centre mall as well as a Nordstrom Rack location at the Ottawa Train Yards shopping centre
The liquidation sales at Nordstrom stores across Canada will begin Tuesday.
A spokesperson for Nordstrom confirmed the impending sales period Monday in an email to The Canadian Press, just after the Ontario Superior Court of Justice gave the U.S. retailer’s Canadian branch permission to start selling off its merchandise.
The upscale department store chain that primarily sells designer apparel, shoes and accessories has six Canadian stores and seven discount Nordstrom Rack locations, including its Rideau Centre location and a Nordstrom Rack at the Ottawa Train Yards shopping centre, which sells merchandise at discounted prices.
When Nordstrom announced the move in early March, it said it expected the Canadian stores to close by late June and 2,500 workers to lose their jobs.
The company initiated the exit from the market because chief executive Erik Nordstrom said, “despite our best efforts, we do not see a realistic path to profitability for the Canadian business.”
Nordstrom opened its first Canadian store in Calgary in 2014, followed by the Ottawa store at the Rideau Centre, which occupied the second and third levels of a former Sears location.
The Rideau Centre store has an alterations and tailoring shop and an energy drinks bar. Merchandise ranges from brand name to designer apparel, housewares, furnishings and beauty products, including brands such as Geox shoes, Gucci, Adidas and Adidas by Stella McCartney.
Later on came Nordstrom Rack, which made its Canadian debut in 2018 at Vaughan Mills, a mall north of Toronto. At the time, Nordstrom said as many as 15 more Rack locations could follow.
Nordstrom promised each Rack store would deliver savings of up to 70 per cent on apparel, accessories, home, beauty and travel items from 38 of the top 50 brands sold in its Canadian department stores.
Nordstrom had trouble with profitability because of its selection of products and the COVID-19 pandemic, said Tamara Szames, executive director and industry adviser of Canadian retail at the NPD Group research firm, a day after Nordstrom announced its exit.
“You would hear a lot of Canadian saying that the assortment wasn’t the same in Canada that it was in the U.S.,” she said.
She noticed Nordstrom started to shift its product mix away from some luxury brands around 2018 and saw it as a sign that the retailer was struggling to maintain its original vision and integrity.
The pandemic made matters worse because many stores were forced to temporarily close their doors to quell the virus and shoppers were less likely to need some of the items Nordstrom sells like dressy apparel because events had been cancelled.
Despite stores reopening and many sectors rebounding, Szames said the apparel business is the only industry NPD Group tracks that has yet to recover from the health crisis.
“The consumer has really been holding back in terms of spendâ¦within that industry.”
At a hearing at Osgoode Hall in Toronto, lawyer Jeremy Dacks, who represented Nordstrom, said the company has “worked hard to achieve a consensual path forward” with landlords, suppliers and a court-appointed monitor to find an orderly way to wind down the business.
The monitor, Alvarez & Marsal Canada, suggested five potential third-party liquidators and Nordstrom was approached by another five. The company decided to go with a joint venture comprised of Hilco Merchant Retail Solutions ULC and Gordon Brothers Canada, which were involved in the liquidation of Target, Sears and Forever 21 in Canada, Dacks said.
They will oversee the sale of merchandise, furniture, fixtures and equipment, but not goods from third parties, which removed products this past weekend, Dacks said. He added that all sales will be final and no returns will be allowed.
Lawyers for Nordstrom landlords Cadillac Fairview, Ivanhoe Cambridge, Oxford Properties Ltd. and First Capital Realty testified Monday that they were pleased with how “smoothly” and “organized” the process has gone so far.
In approving Dacks’ liquidation request, Chief Justice Geoffrey Morawetz agreed, saying Nordstrom is facing a “difficult time, but this process is unfolding in a very cooperative manner.”
Nordstrom required court approval to begin the liquidation because it is winding down its Canadian operations under the Companies’ Creditors Arrangement Act, which helps insolvent businesses restructure or end operations in an orderly fashion.
With files from Joanne Laucius
High-end department store Nordstorm departing Canada, leaving anchor space in Rideau Centre vacant
Deachman: I’m sorry, Nordstrom. I couldn’t afford you.
Canadian Banks' AT1s join selloff after Credit Suisse rescue – BNN Bloomberg
Canadian financial institutions’ regulator moved to reassure investors as the country’s riskiest bank debt joined a global selloff after the value of some Credit Suisse Group AG bonds was wiped out in the bank’s takeover by UBS Group AG.
Canada’s “capital regime preserves creditor hierarchy which helps to maintain financial stability,” the Office of the Superintendent of Financial Institutions said in statement on its website.
Prices of Canadian limited recourse capital notes, known as LRCNs, fell between 2 cents and 5 cents on the dollar Monday before OSFI’s announcement, according to people familiar with the matter who asked not to be named. That has widened the spread on the notes by over 60 basis points compared with Friday’s levels, the people said. Specific levels vary depending on the security.
The bonds are another form of so-called additional tier 1 securities, issued by financial institutions and designed to act as a shock absorber in the system. They can be converted to equity to bolster a bank’s capital if it runs into trouble.
Over the weekend, Swiss regulators triggered a complete writedown of 16 billion francs (US$17.2 billion) of Credit Suisse’s AT1 bonds as part of the rescue plan for the venerable bank. While it wasn’t a surprise that the bonds were likely to take a loss, some investors in the instruments were shocked to be wiped out when Credit Suisse’s shareholders were not.
Under Canada’s capital regime “additional tier 1 and tier 2 capital instruments to be converted into common shares in a manner that respects the hierarchy of claims in liquidation,” said OSFI, referring to a situation in which a bank would reach non-viability status. “Such a conversion ensures that additional tier 1 and tier 2 holders are entitled to a more favorable economic outcome than existing common shareholders who would be the first to suffer losses.”
“Our view is that we don’t expect LRCNs would be wiped out before common equity,” said Furaz Ahmad, a Toronto-based corporate debt strategist at BMO Capital Markets. “OSFI has said that they would convert to common equity, since that is more consistent with traditional insolvency norms and respects the expectations of all stakeholders.”
Earlier Monday, European authorities sought to restore investor confidence in banks’ AT1s by publicly stating that they should only face losses after shareholders are fully written down. AT1s from UBS Group and Deutsche Bank AG fell by more than 10 cents earlier on Monday.
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