Spirit snubs JetBlue's $3.6B takeover bid, prefers Frontier
The budget airline said JetBlue's offer involved 'an unacceptable level of closing risk'
Pilot shortage forces airlines to ground flights this summer
FOX Business' Jeff Flock reports from Philadelphia International Airport, where major airlines need to hire 14,500 pilots per year in order to keep up with a nationwide shortage.
Spirit Airlines rejected a $3.6 billion takeover offer from JetBlue Airways after determining it is not a superior proposal to its previous agreement to merge with Frontier Airlines.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| JBLU | JETBLUE AIRWAYS CORP. | 6.19 | +0.22 | +3.69% |
| SAVE | NO DATA AVAILABLE | - | - | - |
| ULCC | FRONTIER GROUP HOLDINGS | 6.13 | +0.30 | +5.15% |
Under JetBlue's proposal, Spirit shareholders would receive $33 in cash per common share, a 47% premium to the value of Frontier's transaction as of April 29 and a 52% premium to Spirit's stock price as of Feb. 4.
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JetBlue's offer included a commitment to divest some assets in order to win regulatory approval and a $200 million break-up fee in the event that the transaction is not consummated for antitrust reasons.
"Spirit shareholders would be better off with the certainty of our substantial cash premium, regulatory commitments, and reverse break-up fee protection. The Frontier transaction has a similar regulatory profile to ours but offers no divestiture commitment and no reverse break-up fee, while the uncertain value of Frontier’s stock exposes Spirit shareholders to significant risk," JetBlue CEO Robin Hayes said in a statement. "We hope the Spirit Board will now recognize that ours is clearly a superior proposal and engage with us more constructively than they have to date."
However, after a review by Spirit's board, the Miramar, Florida-based airline determined that the deal involves "an unacceptable level of closing risk" that would be assumed by its shareholders.
Spirit noted that obtaining regulatory approval from the Justice Department would be difficult due to the agency's concerns that JetBlue's Northeast Alliance (NEA) with American Airlines will stifle competition. The DOJ has filed a lawsuit seeking to block the arrangement.
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Spirit Airlines board chairman Mac Gardner said in a letter to Hayes that the merger with Frontier will "enable the combined ULCC business to achieve scale, improve operational reliability, have increased relevance to consumers, and do an even better job of delivering ultra-low fares to more consumers and competing more effectively against the Big 4 carriers, as well as against JetBlue."
"We believe that is a clear, pro-consumer narrative that will resonate more successfully with DOJ than a combination with JetBlue, which would eliminate the largest ULCC and remove significant low-cost/low-fare capacity," Gardner added.
Frontier's transaction with Spirit is expected to close in the second half of 2022, subject to regulatory and shareholder approval and customary closing conditions. Under the deal, Spirit shareholders will receive 1.9126 shares of Frontier plus $2.13 in cash for each existing Spirit share they own. Once completed, the cash and stock deal, on a combined basis, is expected to produce annual revenues of $5.3 billion and synergies of $500 million.
The deal will create the nation's fifth-largest carrier and give travelers more options to fly to mid-sized cities as well as underserved regions, according to the companies.