The battle for Spirit Airlines continues. Today, the Spirit Board of Directors has urged stockholders to reject the latest tender offer that JetBlue made on Monday. Spirit is even accusing its rival of making inaccurate statements. Spirit Board once again rejects JetBlue’s offer.
After reviewing the offer for $30 per share with its outside and legal advisors, Spirit maintains its position that the JetBlue proposal doesn’t constitute a superior offer to that of Frontier Airlines and isn’t in the best interest of its shareholders.
On May 16, JetBlue targeted its tender offer directly at Spirit’s shareholders, criticizing the Spirit Board for blocking any attempts to engage and discuss the proposal. JetBlue says that the objections to its offer are ill-founded, including that of risks it would mean to Spirit’s shareholders. CEO Robin Hayes and CFO Ursula Hurley repeated that they are optimistic that a court will rule in favor of the Northeast Alliance NEA with American Airlines, one of the key arguments of Spirit to oppose the JetBlue offer. Also after JetBlue would take over Spirit, competition will be guaranteed through other airlines and the divestiture of Spirit’s assets in the New York/Boston area.
“Spirit has presented the overly simplistic assertion that just because the Department of Justice (DoJ) is suing over the NEA, they will block the transaction. If you think about that proposition with the benefit of just a few facts, you’ll immediately see how wrong it is. The DOJ will look at every transaction on its own merits. (…) Making assumptions about the DOJ’s reaction to this transaction, based solely on an inaccurate representation of their position in the NEA litigation, is just wrong”, Hayes said on Tuesday in a Bank of America presentation.
In a letter to stockholders, the Spirit Board maintains its position that “the proposed combination of JetBlue and Spirit lacks any realistic likelihood of obtaining regulatory approval, while our company faces a long and bleak limbo period as we await resolution. In that scenario, a $1.83 per share reverse break-up fee will not come close to adequately compensating Spirit stockholders for the significant business disruption Spirit will face during what JetBlue acknowledges will be a protracted regulatory process.”
Skepticism at the DoJ
Spirit refers to skepticism at the Department of Justice (DoJ) over JetBlue’s divestiture plans as they wouldn’t address the broader competitive implications when it is merged into the alliance between JetBlue and American: “The DOJ has alleged that “the harms threatened by the [NEA] … extend well beyond Boston and New York City. … The [NEA] allows American to forgo independent growth that would have benefited consumers. By effectively absorbing JetBlue’s operations in Boston and New York City, American can reduce investments not just in those cities, but also in other parts of its network where it otherwise would maintain or add service. Consequently, consumers across the country will have fewer options and pay higher fares.”
The fight for Spirit is getting nasty traits as the Board accuses JetBlue of misleading stockholders with inaccurate statements and mischaracterizations. Instead of failing to engage with JetBlue, the Board says that it had a two-hour call in which the JetBlue management was able to address all the questions. Antitrust advisors of both airlines discussed all issues in separate calls. It also says that “Spirit shared projections with JetBlue’s financial advisors and provided voluminous documentary due diligence material through a secure virtual data room.”
It adds that “JetBlue’s focus on Spirit appears to be an attempt to distract from the fact that JetBlue’s own business is in disarray.” Spirit says that its merger plan with Frontier Airlines is advancing as planned. “We continue to recommend that Spirit stockholders vote FOR the merger with Frontier on June 10th, as we believe the combination of these two ULCCs is the best way to deliver maximum value to Spirit stockholders.”
Frontier welcomes Spirit’s rejection
Frontier responded to Spirit’s rejection of the tender offer. CEO Barry Biffle said in a statement: “We are pleased that the Spirit Board of Directors has again reaffirmed its commitment to combining with Frontier, which increases competition by bringing more ultra-low fares to more travelers and delivering substantial shareholder value. (…) The Spirit Board took the right step in urging its shareholders to reject JetBlue’s proposal and vote FOR the merger with Frontier. We continue to believe that JetBlue is worried about increased competition and put forward a proposal for a transaction that, simply put, can’t be completed.”
