JetBlue Launches Hostile Takeover of Spirit Airlines

JetBlue Airways (JBLU) has launched a hostile takeover try for Spirit Airways (SAVE) on Monday, Might 16, after the low cost provider rejected JetBlue’s earlier all-cash $3.6 billion supply.

The New York-based airline issued a young supply to amass all of the excellent Spirit shares for $30 per share in money, with out curiosity and fewer any required withholding taxes, after the Miramar, Fla., firm rejected JetBlue’s proposal in favor of a earlier lower-priced supply from Frontier Airways (ULCC). JetBlue additionally urged Spirit shareholders to “Vote No” in a proxy assertion towards the Spirit/Frontier merger at Spirit’s upcoming assembly. If shareholders settle for the JetBlue deal, the mixed firm can be the fifth-largest airline within the U.S.

Fluctuating Bid Affords

The $30 per share all-cash supply, whereas a 60% premium to the Frontier supply, is a drop from the $33 all-cash supply JetBlue made on April 5. The drop, in accordance with JetBlue, displays Spirit’s unwillingness to share the identical info that Frontier acquired. Spirit’s shares have not traded above $30 since final July.

“The Spirit board failed to offer us the required diligence info it had offered Frontier after which summarily rejected our proposal, which addressed its regulatory issues, with out asking us even a single query about it. The Spirit board based mostly its rejection on unsupportable claims which are simply refuted,” mentioned JetBlue Chief Government Officer Robin Hayes in a Might 16, 2022 letter issued to Spirit shareholders detailing the advantages of its transaction.

JetBlue added that if Spirit made the required info obtainable, it was ready to barter in good religion a consensual transaction at $33 a share.

Spirit’s shares jumped 12% in noon Monday buying and selling. JetBlue’s inventory slid 5% whereas Frontier’s shares gained 5%.

Spirit and Frontier’s Connections

Within the letter to Spirit shareholders, JetBlue’s Hayes wrote, “Ask your self a easy query: why gained’t the Spirit Board have interaction with us constructively? The pursuits of Invoice Franke’s Indigo Companions and the long-standing relationships between the 2 corporations is the plain reply.”

Franke is Frontier’s chairman and the managing accomplice of Indigo, a personal fairness agency. He was Spirit’s chairman a decade in the past and served with a few of Spirit’s present board members, together with its present chairman, Mac Gardner.

On Febuary 7, Frontier and Spirit introduced a $2.9 billion merger settlement unanimously accepted by each corporations. Spirit fairness holders are to obtain 1.9126 shares of Frontier plus $2.13 in money for every Spirit share. This got here to $25.83 per share at Frontier’s closing inventory worth of $12.39 on Feb. 4, and a 19% premium over Spirit’s closing worth. Since then, Frontier’s shares have fallen 25%, bringing down the deal’s worth.

Sweetened Deal

On April 5, JetBlue provided $3.6 billion in money for Spirit, which got here to $33 a share. It was a 52% premium to the $21.73 Spirit closed at on Feb. 4, and 37% greater than the Frontier supply.

On Might 2, JetBlue sweetened its deal. The corporate mentioned it might divest Spirit belongings in New York and Boston to win regulatory approval and provided a $200 million reverse breakup charge that may turn out to be payable if antitrust causes prevented the deal’s completion. Spirit rejected that deal the identical day.

The Backside Line

JetBlue Airways had provided a bid to take over Spirit Airways and inspired Spirit shareholders to reject the Spirit/Frontier merger. Jetblue maintains that its supply will give Spirit shareholders $30 per share, whereas the Frontier supply quantities to simply underneath $19 per share.