JetBlue Airways is not taking no for an answer from Spirit Airlines and is now making a hostile offer directly to Spirit shareholders.
New York-based JetBlue made its second unsolicited bid Monday to acquire Spirit and thwart its planned merger with rival ultra-low-fare carrier Frontier Airlines of Denver. Spirit said in a statement that it would review JetBlue’s new offer, which is required by its fiduciary responsibility to shareholders.
Miramar-based Spirit employs 3,400 people in South Florida and is the largest carrier out of Fort Lauderdale-Hollywood International Airport.
JetBlue’s latest move is a hostile attempt to get Spirit shareholders to sell their shares for $30 per share in cash (just over $3.2 billion), and that it would increase to its original offer of $33 per share if management and board Spirit management cooperate.
The offer comes two weeks after Spirit announced that its board of directors rejected JetBlue’s offer and intended to go ahead to combine with Frontier to create the nation’s fifth airline. In February, Spirit and Frontier announced they would be merging, seeking to bring their cheap passenger fares from coast to coast.
Spirit has set a June 10 shareholder vote on its merger with Frontier and asked shareholders to approve the deal. JetBlue filed a proxy statement Monday asking Spirit shareholders to “vote no” against the Spirit-Frontier merger, calling the $2.9 billion cash-and-stock deal “inferior, high-risk and low-value.”
“Given the complete unwillingness of the Spirit Board of Directors to share the same due diligence information that was shared with Frontier, JetBlue is now offering to acquire Spirit for $30 per share in cash through a fully funded takeover bid.” JetBlue said in a statement, noting that its offer is a 60% higher premium than Frontier’s. “JetBlue is fully prepared to negotiate a $33 Consensus Transaction in good faith, subject to due diligence.”
Earlier this month, JetBlue said it was also offering Spirit a $200 million breakup fee if federal regulators blocked its acquisition of the Broward County airline on antitrust grounds. Ultimately, federal regulators would have to approve any deal Spirit and an airline partner agree to. That evaluation would take at least 18 to 24 months.
Spirit and Frontier share a similar deep-discount business model and have had overlapping executives and investors. Indigo Partners, a private equity group, was the first owner of a controlling share of Spirit from 2006 to 2013, before selling its stake and buying the majority of Frontier. Last year, Indigo took Frontier public, selling shares to investors.
Frontier CEO Barry Biffle was Spirit’s chief marketing officer from 2008 to 2016. Indigo’s co-founder is chairman of the Frontier board of directors, and some of Spirit’s directors have ties to Indigo. In a letter to Spirit shareholders, JetBlue claimed that “long-standing relationships” between Spirit and Indigo are the reason Spirit will not engage in deal talks with JetBlue.
Airline industry analysts have said that Spirit and Frontier have long been likely candidates for a merger, while JetBlue’s original April bid for Spirit came as a surprise.
Spirit shares rose $2.31 on Monday on buying speculation, closing at $19.27. Frontier shares added $0.51 to close at $9.23, while JetBlue’s fell $0.61 to $9.45.