UPDATE – JetBlue has made a new offer directly to the shareholders of Spirit Airlines and has called on them to vote against the proposed agreement with Frontier Airlines. Through its wholly-owned subsidiary Sundown Acquisition Corp, JetBlue has submitted an all-cash, fully financed tender to purchase Spirit for $30 per share, it said on May 16. JetBlue directly targets Spirit shareholders with new offer.
The offer represents “a sixty percent premium to the value of the Frontier transaction as of May 13, 2022 – a very compelling offer and higher than the premium implied by JetBlue’s original proposal. JetBlue is fully prepared to negotiate in good faith a consensual transaction at $33, subject to receiving necessary diligence”, the airline says in a media statement.
But that’s exactly the problem for JetBlue: “Given the Spirit Board of Directors’ complete unwillingness to share the same necessary diligence information that was shared with Frontier, JetBlue is now offering to acquire Spirit for $30 per share in cash through a fully financed tender offer.” The carrier notes that Spirit rejected the enhanced offer in April without asking JetBlue a single question about the regulatory concerns.
Spirit Airlines has said on multiple occasions since early May that the JetBlue offer isn’t superior to the original agreement with Frontier and poses serious risks for its shareholders. The Florida-based carrier is seeing many red flags and doubts if a takeover by JetBlue would get regulatory approval from the Department of Justice. The DoJ already has raised serious objections against the Northeast Alliance (NEA) between JetBlue and American Airlines in the New York-Boston region, bringing the case into court in September. JetBlue responded that it would be willing to dispose of assets if that is needed to secure the approval for a deal with Spirit, but still, Spirit rejected the unsolicited offer.
‘Spirit Board failed to act in the interest of the shareholders’
Spirit shareholders are to vote on the Spirit/Frontier agreement on June 10. In an attempt to change their minds, JetBlue is now targeting them directly. In a letter, the New York-based airline says that the Spirit Board has failed to act in the best interest of the shareholders to engage in the superior JetBlue bid. “JetBlue offers more value – a significant premium in cash – more certainty, and more benefits for all stakeholders. Frontier offers less value, more risk, no divestiture commitments, and no reverse break-up fee, despite more overlap on non-stop routes and their own regulatory challenges.”
JetBlue subsequently puts the blame for Spirit’s rejection so far on the doorstep of Frontier’s main shareholder, Indigo Partners. “Ask yourself a simple question: why won’t the Spirit Board engage with us constructively? The interests of Bill Franke’s Indigo Partners and the long-standing relationships between the two companies is the obvious answer.” Before selling his share in 2013, Franke used to be a shareholder in Spirit Airlines, but he still has strong ties with multiple directors and Chairman of the Board, McIntyre Gardner.
JetBlue maintains that its latest all-cash offer is superior to that of Frontier, just as it has said in April. Its divestiture commitment offers more regulatory certainty than the Spirit Board likes to portray, but JetBlue doesn’t provide evidence that the DoJ will back a JetBlue/Spirit merger. It stresses that the proposed merger with Frontier has regulatory risks too, as there is more overlap in flights between Frontier and Spirit (104 flights) than between JetBlue and Spirit (54).
JetBlue also offers a $200 million reverse break-up fee to Spirit, in case the negotiations fail. And there is another carrot: “If the Spirit shareholders vote against the transaction with Frontier and compel the Spirit Board to negotiate with us in good faith, we will work towards a consensual transaction at $33 per share, subject to receiving the information to support it.”
Spirit will study offer
In a statement, the Spirit Board said: “We will carefully review JetBlue’s tender offer to determine the course of action that it believes is in the best interests of Spirit and its stockholders. Spirit stockholders are urged to take no action with respect to the JetBlue tender offer at this time pending the Board’s evaluation of the offer.”
Spirit says it intends to advise its stockholders of the Board’s formal position regarding the JetBlue tender offer within ten business days.
Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016.
Richard is contributing to AirInsight since December 2018. He also writes for Airliner World, Aviation News, Piloot & Vliegtuig, and Luchtvaartnieuws Magazine. Twitter: @rschuur_aero.
