JetBlue Launches Hostile Takeover of Spirit Airlines

Accuses Spirit of favoring former chairman

JetBlue Airways (JBLU) has launched a hostile takeover attempt for Spirit Airlines (SAVE) on Monday, May 16, after the discount carrier rejected JetBlue's previous all-cash $3.6 billion offer.

The New York-based airline issued a tender offer to acquire all the outstanding Spirit shares for $30 per share in cash, without interest and less any required withholding taxes, after the Miramar, Fla., company rejected JetBlue's proposal in favor of a previous lower-priced offer from Frontier Airlines (ULCC). JetBlue also urged Spirit shareholders to "Vote No" in a proxy statement against the Spirit/Frontier merger at Spirit's upcoming meeting. If shareholders accept the JetBlue deal, the combined company would be the fifth-largest airline in the U.S.

Key Takeaways

  • JetBlue Airways has launched a hostile takeover attempt for Spirit Airlines at $30 a share.
  • In a letter to Spirit shareholders, JetBlue has encouraged them to "Vote No" in a proxy statement against a Spirit/Frontier merger.
  • The JetBlue bid could rise to $33 per share if Spirit provides the necessary diligence.


Fluctuating Bid Offers

The $30 per share all-cash offer, while a 60% premium to the Frontier offer, is a drop from the $33 all-cash offer JetBlue made on April 5. The drop, according to JetBlue, reflects Spirit’s unwillingness to share the same information that Frontier received. Spirit's shares haven't traded above $30 since last July.

"The Spirit board failed to provide us the necessary diligence information it had provided Frontier and then summarily rejected our proposal, which addressed its regulatory concerns, without asking us even a single question about it. The Spirit board based its rejection on unsupportable claims that are easily refuted," said JetBlue Chief Executive Officer Robin Hayes in a May 16, 2022 letter issued to Spirit shareholders detailing the benefits of its transaction.

JetBlue added that if Spirit made the necessary information available, it was prepared to negotiate in good faith a consensual transaction at $33 a share.

Spirit's shares jumped 12% in midday Monday trading. JetBlue's stock slid 5% while Frontier's shares gained 5%.

Spirit and Frontier's Connections

In the letter to Spirit shareholders, JetBlue's Hayes wrote, “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.”

Franke is Frontier's chairman and the managing partner of Indigo, a private equity firm. He was Spirit's chairman a decade ago and served with some of Spirit’s current board members, including its current chairman, Mac Gardner.

On Febuary 7, Frontier and Spirit announced a $2.9 billion merger agreement unanimously approved by both companies. Spirit equity holders are to receive 1.9126 shares of Frontier plus $2.13 in cash for each Spirit share. This came to $25.83 per share at Frontier’s closing stock price of $12.39 on Feb. 4, and a 19% premium over Spirit's closing price. Since then, Frontier's shares have fallen 25%, bringing down the deal's value.

Sweetened Deal

On April 5, JetBlue offered $3.6 billion in cash for Spirit, which came to $33 a share. It was a 52% premium to the $21.73 Spirit closed at on Feb. 4, and 37% higher than the Frontier offer.

On May 2, JetBlue sweetened its deal. The company said it would divest Spirit assets in New York and Boston to win regulatory approval and offered a $200 million reverse breakup fee that would become payable if antitrust reasons prevented the deal's completion. Spirit rejected that deal the same day.

The Bottom Line

JetBlue Airways had offered a bid to take over Spirit Airlines and encouraged Spirit shareholders to reject the Spirit/Frontier merger. Jetblue maintains that its offer will give Spirit shareholders $30 per share, while the Frontier offer amounts to just under $19 per share.

Article Sources
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  1. JetBlue. "JetBlue Urges Spirit Shareholders to Protect Their Interests and ‘Vote No’ on Frontier Transaction at Upcoming Spirit Special Meeting."

  2. JetBlue Investor Relations. "JetBlue Submits Superior Proposal to Acquire Spirit, Positioning America’s Much-Loved Airline as the Most Compelling National Low-Fare Challenger to the ‘Big Four’ Airlines."

  3. Frontier Investor Relations. "FRONTIER AIRLINES AND SPIRIT AIRLINES TO COMBINE, CREATING AMERICA’S MOST COMPETITIVE ULTRA-LOW FARE AIRLINE."

  4. JetBlue Investor Relations. "JetBlue Submits Enhanced Superior Proposal to Acquire Spirit."

  5. Spirit Airlines. "Spirit Airlines Board of Directors Reiterates Support for Merger with Frontier Airlines."

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