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JetBlue, Mondelez Show They’re Hungry to Grow

The stock market had a terrible time last week, so many investors came back from the long weekend hoping to see a bit of a bounce. That’s exactly what they got as Wall Street seemed to be in a better mood despite ongoing concerns about inflation and economic sluggishness. The Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) all finished sharply higher, with gains of around 2% to 2.5% on the day.

Index

Daily Percentage Change

Daily Point Change

Dow

+2.15%

+641

S&P 500

+2.45%

+90

Nasdaq

+2.51%

+271

Data source: Yahoo! Finance.

There’s been a rising amount of merger and acquisition activity as companies try to take advantage of bargain stock prices to find good strategic fits. On Tuesday, investors looked closely at Mondelez International (NASDAQ: MDLZ) and JetBlue Airways (NASDAQ: JBLU) because both companies made plays toward acquisitions that could yield some great growth opportunities for the companies involved.

Mondelez looks over the Clif

Shares of Mondelez International were up almost 2% on Tuesday. The food giant looked like it needed some energy because it announced a purchase over the weekend that should help it in a key segment.

Mondelez will pay $2.9 billion to purchase privately held Clif Bar, which makes the Clif and Luna brands of organic snack bars. Clif’s owners also stand to make more money based on contingent earn-out provisions in the acquisition agreement.

With the deal, Mondelez will boost its global snack bar business above the $1 billion mark, and it believes that Clif and Luna will complement its refrigerated snack business in both the U.S. and U.K. markets. In addition, Mondelez sees the acquisition as furthering its broader strategy to emphasize higher-growth opportunities in the food business.

Mondelez has already been busy in the acquisition space, with purchases of Mexican confectionary specialist Ricolino as well as European cake and pastry company Chipita. Moreover, investors have been impressed at how impervious the food stock has been to the bear market, with shares down less than 15% from their record highs.

JetBlue tries harder

Shares of JetBlue Airways didn’t do nearly as well, falling nearly 2%. But investors in its acquisition target, Spirit Airlines (NYSE: SAVE), fared much better, seeing their stock rise another 8%.

JetBlue has made numerous attempts to acquire Spirit, failing thus far to persuade the bargain airline’s management board to move away from its previous deal to merge with Frontier Group Holdings (NASDAQ: ULCC). Late Monday, JetBlue added $2 per share to its offer, boosting it to $33.50 per share in cash. It also continued to offer a reverse break-up fee in the event of antitrust regulators choosing not to approve the merger.

There’s little reason to believe that Spirit will be any more likely to accept this offer than it was the last ones since even JetBlue’s previous offer was more generous than what Frontier’s deal value was. Yet JetBlue seems convinced that buying Spirit is the only way it can move forward, even as it offers to sell off all of its assets in key markets like New York and Boston in order to persuade the U.S. Department of Justice to accept a deal.

Airlines are going through tough times right now as fuel costs are soaring, international travel remains at depressed levels, high fares have already curbed demand, and now the threat of an economic recession looms large. Making a pricey acquisition is a risky play for JetBlue, but it seems as though the company believes it must grow at all costs in order to compete against the major carriers.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends JetBlue Airways. The Motley Fool has a disclosure policy.

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