JetBlue has submitted a new proposal to the board of directors of Spirit Airlines to acquire all of Spirit’s outstanding common stock. The offer is the latest in a series JetBlue has made for the ultra-low-cost carrier (ULCC), which Spirit has so far rejected citing a low probability of obtaining antitrust clearance. JetBlue’s “improved” offer increases the reverse termination fee payable to Spirit if the transaction doesn’t go through for antitrust reasons from $200 million to $350 million along with offering $31.50 per share to include $30 per share in cash at the closing of the transaction and a prepayment of $1.50 per share, also in cash, of the reverse termination fee.
“Combining JetBlue and Spirit would create a true national competitor to the dominant legacy carriers, delivering low fares and a great experience for more customers, more opportunities and good paying jobs for crew members, and more value for stockholders,” said JetBlue CEO Robin Hayes. “The key features of our Improved Proposal—the up-front cash payment and increased reverse break-up fee—reflect the seriousness of our commitment and underscore our confidence in completing this transaction.”
JetBlue’s offer is competing against a proposed merger agreement between Spirit and fellow ULCC Frontier Airlines, which was made public in February 2022. Last Friday, Spirit and Frontier announced an amendment to the agreement under which Frontier would pay a reverse termination fee of $250 million if the deal is not completed for antitrust reasons. In addition, Spirit reported that independent proxy advisory firm Glass, Lewis & Co. was recommending that Spirit stockholders vote for the proposed merger with Frontier.
“In its favorable recommendation, Glass Lewis acknowledges the value of the stock consideration in our Frontier merger agreement, which enables Spirit stockholders to participate in the upside of the combined company, as well as post-pandemic recovery in the airline industry,” said Spirit President and CEO Ted Christie. “Glass Lewis shares our Board’s view that the Frontier transaction has an easier path to close and provides third party validation that JetBlue may have ulterior motives behind its offer.”
As previously reported by AVweb, JetBlue filed a proxy statement and launched a website last month urging Spirit shareholders to vote against the proposed merger with Frontier. JetBlue maintains that its offer shares a similar risk profile to the Frontier deal regarding regulatory approval. Spirit is expected to hold a special meeting of its stockholders on June 10 to vote Frontier’s offer.
Someone in JetBlue’s legal department still thinks this will pass anti-trust scrutiny, otherwise why increase the cost of the takeover to JetBlue.
I find it curious that there are anti-trust concerns for JetBlue when United merged with Continental, American bought US Airways, and Delta merged with Northwest (among other examples).
It appears to me that Jet Blue is trying really hard to prevent Spirit from merging with Frontier. That merger would create a major competitor to Jet Blue. According to other information I have read, Spirit and Jet Blue operating areas significantly overlap, which is one reason why the SEC may consider it an anti-trust action. However, as mentioned above, the merger of several legacy carriers calls into question how aggressive the government might be in Jet Blue’s case.