For all who hoped for some resolution to the months-long saga over the future of Spirit Airlines on June 30, no go. The carrier has postponed a shareholder vote on a merger with Frontier Airlines to July 8.
Spirit will immediately open and close the June 30 meeting with no vote in order for its board to “continue discussions” with both preferred suitor Frontier and hostile bidder JetBlue Airways, the Florida-based discounter said late Wednesday. This is the second time Spirit has delayed a shareholder vote, which was first scheduled for June 10.
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Frontier is offering shareholders $4.13 plus 1.91 of its own shares for each Spirit share plus a $350 million reverse break-up fee, while JetBlue is offering at least $33.50 per share to up to $34.15 a share based on certain conditions and a $400 million break-up fee. All in, Frontier’s offer is worth $2.4 billion and JetBlue’s nearly $3.8 billion, according to an analysis by Raymond James.
The resulting airline from either a Spirit-Frontier or Spirit-JetBlue merger will be the fifth largest in the U.S. with a roughly 8 percent share of the market.
JetBlue Airways is not done yet trying to acquire Spirit Airlines. With just three days until shareholders vote, the New York-based carrier has upped its offer again, raising its reverse breakup fee to $400 million to beat rival bidder Frontier Airlines.
JetBlue’s latest offer — its fourth for Spirit — also includes a prepayment of $2.50 per share of the breakup fee, and a “ticking fee mechanism” where the airline would pay Spirit shareholders an additional $0.10 per share monthly from January 2023 until the deal closed, JetBlue said Monday. The ticking fee could increase JetBlue’s overall offer to as much as $34.15 per share. Its last offer was for $33.50 per share plus a $350 million breakup fee.
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“We’ve discussed our offer directly with Spirit shareholders and are now modifying our proposal in response to shareholders’ expressed interest, to include a monthly payment for shareholders, with the certainty of a significant cash premium at closing,” JetBlue CEO Robin Hayes said Monday.
And, in a letter directly to Spirit shareholders, Hayes said the airline’s board has “never negotiated with us and have now favored a transaction that better serves Frontier’s controlling shareholder than Spirit’s shareholders.”
Frontier’s latest offer, unveiled on June 24, included an additional $2 per share for a total of $4.13 a share, plus a $350 million reverse break up fee. The offer was valued at $2.7 billion based on closing stock prices that day.
Spirit shareholders will vote to accept or reject Frontier’s offer on June 30.
With the likelihood improving of a successful bid for Spirit Airlines, JetBlue Airways has raised its offer for the discounter a second time in as many weeks.
The New York-based airline is now offering Spirit shareholders $33.50 per share, or a total of $3.7 billion, JetBlue said Monday. That is a $2 per share improvement over its last offer of $31.50 a share that it made on June 6, and $0.50 more than it initial offer in April of $33 per share.
“After discussions with the Spirit team last week and further due diligence review, we are more convinced than ever that a JetBlue-Spirit transaction would create a true national competitor to the Big Four and deliver value to all of our stakeholders,” JetBlue CEO Robin Hayes said.
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“Our previous proposal was met with an extremely positive reaction from Spirit stockholders, and we believe they will be even more pleased with these improved terms, including additional regulatory commitments that reflect our confidence in our ability to obtain antitrust approval and are a direct result of our diligence,” Hayes added.
With regulatory approval the top of concern of Spirit’s leadership team, JetBlue reiterated its commitment to divest all of Spirit’s assets in Boston and New York, as well as gates at the Fort Lauderdale airport where both airlines have bases. The airline told Spirit’s board Monday that it would “not increase its presence in the airports covered by our Northeast Alliance” with American Airlines if the deal occurs.
Spirit has twice rejected JetBlue favoring, instead, its preferred merger partner Frontier Airlines. However, after JetBlue’s last offer, Spirit gave the carrier the same level of access to due diligence data that it had granted Frontier — something JetBlue had been seeking for months.
Denver-based Frontier declined to improve its offer, which totals roughly $2.9 billion in cash and stock, after JetBlue raised its bid on June 6.
A JetBlue-Spirit merger would create the fifth largest U.S. airline.
The board was also continuing to work with Frontier under the terms of the existing merger agreement with Frontier, Spirit president and CEO Ted Christie said Tuesday.
“As part of this process, Frontier and JetBlue are being given access to the same due diligence information, on the same terms. The board expects to bring the process to a conclusion and provide an update to stockholders ahead of the special meeting of Spirit stockholders scheduled for Thursday, June 30, 2022,” it said in a statement.
Spirit had previously delayed that key shareholder vote on a merger — either with Frontier Airlines or JetBlue — by three weeks.
“Spirit continues to be bound by the terms of its merger agreement with Frontier, under which a ‘Superior Proposal’ is defined as being both reasonably capable of being consummated and more favorable to Spirit’s stockholders from a financial point of view,” the statement added.
A new report from J.P. Morgan analyst Jamie Baker sees the likelihood of a merger between JetBlue Airways and Spirit Airlines improving. The comments come days after JetBlue improved its offer for Spirit by more than $150 million, and the latter delayed a key shareholder vote on a merger — either with Frontier Airlines or JetBlue — by three weeks to June 30.
“We believe some merger involving Spirit is a high probability outcome,” Baker wrote Thursday. “We also believe a merger outcome between Spirit and JetBlue is a growing probability and may overtake the likelihood of a Frontier deal.”
JetBlue is offering Spirit shareholders $31.50 per share that totals roughly $3.4 billion. The offer includes a $1.50 per share prepayment of a $350 million break up fee in the event U.S. regulators do not approve the deal. Frontier is offering Spirit investors the equivalent to $2.9 billion in cash and stock.
On June 6, following receipt of JetBlue’s improved offer, Frontier declined to raise its bid for Spirit, Securities & Exchange Commission filings show.
Spirit Airlines shareholders have another 20 days to decide whether they support a merger with Frontier Airlines or prefer a hostile, but potentially more lucrative if it’s approved by regulators, takeover by JetBlue Airways. The vote was previously scheduled for Friday, June 10.
Florida-based Spirit said Wednesday that the delay to June 30 allowed the airline’s board to “continue discussions” with shareholders, Frontier, and JetBlue.
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On Monday, JetBlue improved its offer to Spirit shareholders by more than $150 million to an all-cash $3.4 billion. Frontier is offering shareholders the equivalent to $2.9 billion in cash and stock.
Whoever Spirit decides to merge with, Frontier or JetBlue, will become the fifth largest U.S. carrier after American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines.
JetBlue Airways has raised its bid to takeover Spirit Airlines in the latest volley in an escalating proxy war with Frontier Airlines.
JetBlue upped its reverse break-up fee on Monday to $350 million — $100 million more than Frontier — and offered to pre-pay $164 million of said fee in its latest offer to Spirit shareholders. All in, the offer values Spirit at $31.50 per share.
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The offer comes less than a week after Frontier improved its offer for Spirit with a $250 million reverse break-up 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 crewmembers and team members, and more value for stockholders,” JetBlue CEO Robin Hayes said in a letter to the Spirit board. “The key features of our improved proposal – the up-front cash payment and increased reverse break-up fee – are not an illusion. This offer reflects the seriousness of our commitment and underscores our confidence in completing this transaction. Additionally, given the similar regulatory risks of the two transactions and the increased reverse break-up fee we are prepared to provide, we believe our Improved Proposal remains a Superior Proposal by any measure.”
Spirit shareholders are scheduled to vote on the Frontier merger proposal on June 10. The vote is the culmination of a four-month saga since Frontier and Spirit first announced plans to merge. JetBlue unveiled an unsolicited bid for Spirit in April, which the latter carrier rejected. JetBlue is now attempting a hostile takeover by asking Spirit shareholders to reject the Frontier deal.
The board at Spirit Airlines took little time in weighing in on JetBlue Airways’ hostile takeover bid. The New York-based carrier’s latest $30-per-share offer “is NOT in the best interests of Spirit and its stockholders,” the board said Thursday.
“JetBlue’s tender offer has not addressed the core issue of the significant completion risk and insufficient protections for Spirit stockholders. Based on our own research and the advice of antitrust and economic experts, our view is 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,” said Mac Gardner, Chairman of the Board of Directors for Spirit Airlines, in a statement.
JetBlue fired back with its own statement: “The Spirit board, driven by serious conflicts of interest, continues to ignore the best interests of its shareholders by distorting the facts to distract from their flawed process and protect their inferior deal with Frontier. Regarding regulatory approval, Spirit would have you ignore the current regulatory climate to think that approval of their Frontier deal is assured. That is simply not true. Both deals are subject to regulatory review, and both deals have a similar risk profile.”
JetBlue launched its hostile takeover on May 16, nearly two weeks after the Spirit board rejected an unsolicited offer from the airline. The Spirit board supports a merger with Frontier Airlines, which shareholders will vote on on June 10. The Frontier-Spirit combo also has the backing of both airlines flight attendant union.
The flight attendant unions representing cabin crew members at Frontier Airlines, JetBlue Airways, and Spirit Airlines are backing a merger of Frontier and Spirit, or at least opposing JetBlue’s hostile takeover attempt of Spirit.
The Association of Flight Attendants-CWA (AFA), which represents flight attendants at Frontier and Spirit, said May 17 that it had reached a merger transition agreement with Frontier. The agreement would oversee the integration of cabin crew groups at Frontier and Spirit if the merger goes ahead.
“We are thrilled to announce our support for the merger of Spirit and Frontier Airlines after reaching a transition agreement that protects flight attendant jobs,” AFA International President Sara Nelson said. “We support the necessary regulatory approvals that will improve competition, increase consumer options and experience, and maintain and grow good union jobs.”
On Wednesday, the Transport Workers Union (TWU), which represents flight attendants at JetBlue, came out firmly against the New York-based airline’s hostile takeover attempt. “After thoughtfully considering the impact that a JetBlue acquisition of Spirit Airlines would have on customers and our workforce, the TWU fully opposes JetBlue’s proposed hostile takeover. JetBlue has proven itself to be an abusive employer by disregarding the well-being of its workforce, and refusing to abide by its existing union contracts,” TWU International President John Samuelson said.
Spirit shareholders will decide the fate of the airline. They are scheduled to vote on a combination with Frontier on June 10, which the Spirit board supports and JetBlue opposes through a separate tender offer.
JetBlue has commenced a hostile all-cash takeover bid for Spirit Airlines, according to reports, just days after the airline rejected an offer from it. JetBlue earlier offered $33 per share, and is now in a takeover battle for Spirit with Frontier. JetBlue said its deal would help better compete with the legacy airlines that control nearly 80 percent of the passenger market.
JetBlue said on Monday it had filed a “Vote No” proxy statement, urging Spirit shareholders to vote against the planned merger with Frontier, Reuters said.
In an open letter to Spirit shareholders, published Monday, JetBlue said it was confident it would win regulatory approval.
“Our recent economic analysis, using Department of Transportation Data, shows JetBlue’s presence on a nonstop route decreases legacy fares by ~16%, about three times as much as the presence of an ultra-low-cost carrier. This phenomenon is well-established and foundational to JetBlue’s business model.
“We are not the only ones who cite the JetBlue Effect. Coined by an MIT study in 2013, the JetBlue Effect has been acknowledged by the Department of Justice (DOJ) as recently as 2021 when it said, ‘JetBlue’s reputation for lowering fares is so well known in the airline industry that it has earned a name: the ‘JetBlue Effect.’ JetBlue’s record in Boston and New York illustrates why.”
Meanwhile, JetBlue said that any Frontier deal isn’t less risky, and warned shareholders they would be “misled” if they thought otherwise.
“Both transactions would create the #5 player with very similar market share. A combined JetBlue and Spirit would have an 8% market share based on full year 2021 seats compared to 7% for a combined Frontier and Spirit. Frontier overlaps with Spirit on significantly more nonstop routes (104) than JetBlue (54)10, and JetBlue has less overlap in flights, seats, and ASMs than Frontier in the metropolitan areas served by both11,” JetBlue said in the latter.
JetBlue also pushed forward the idea they would receive greater financial rewards. In the letter it added: there was “more value and more certainty for Spirit shareholders with our all-cash offer. JetBlue offers you $30 per share in cash, representing a 60% premium to the value of the Frontier transaction as of May 13, 2022 , a 77% premium to Spirit’s latest closing price, and a 38% premium to Spirit’s unaffected share price.”
JetBlue also claimed there would be better trading value in the short term.
“… We expect the outcome of the Spirit special meeting to influence how the Spirit shares will trade in the short term. Based on the trading patterns since the Frontier transaction was announced, we expect that, if the transaction is approved, Spirit’s shares will trade at approximately $177. On the other hand, based on what we observed since our proposal became public, if the Frontier transaction is rejected, we expect Spirit shares to trade between approximately $23.1 and $25.58 , at least a 36% premium to Spirit’s latest closing share price,” it wrote in the open letter.
Shares of Spirit rose more than 19 percent to $20.28 in pre-market trading.
