JetBlue expresses hostility to Spirit’s lower takeover bid aviation news

JetBlue Airways Corp. is buying Spirit Airlines Inc. for $3.3 billion in hostile cash in a direct appeal to shareholders to beat Frontier Group Holdings Inc.’s competing bid for the discount airline.

JetBlue’s proposal is worth $30 a share, $3 less than the original approach that was rejected by Spirit’s board two weeks ago. The New York-based company said on Monday that it would pay a higher price if a “consensual deal” was reached. JetBlue’s latest offer represents a 77% premium to Spirit’s closing price on Friday.

Shares of Spirit were up 8.4 percent at $18.40 at 9:35 a.m. in New York. JetBlue shares fell 2.5% and Frontier shares rose 4%.

“This shows that the original JetBlue offer was serious and not an attempt to undermine the Spirit-Frontier deal,” said Savanthi Syth, an analyst at Raymond James Financial Inc.

The move marks the latest twist in the takeover battle for Miramar, Florida-based Spirit. JetBlue sees the acquisition as its best opportunity for near-term growth, even though the deal means combining its own full-service offering with a model based on offering the lowest prices and charging extra.

Spirit rejected an earlier unsolicited $3.6 billion offer from JetBlue over concerns that antitrust issues would prevent it from perfecting, and insisted on agreeing to be acquired by Denver-based Frontier for $2.9 billion. Spirit and Frontier did not immediately respond to a request for comment.

JetBlue said in a statement that Spirit Management’s proposed deal with Frontier, including shares, was “high risk and low value” and urged investors to reject the deal at a meeting scheduled for June 10.

Letter to Shareholders

JetBlue has set up a website — www.JetBlueOffersMore.com — and sent out a letter to Spirit shareholders as part of its attempt to derail the Frontier deal, with CEO Robin Hayes arguing that his own offer offers more value, more Certainty and more benefits for all stakeholders.

Hayes also tried to justify the acquisition in a letter to his own employees, saying “by voting against the Frontier merger, Spirit shareholders can push the Spirit board back to the negotiating table, provide us with the information we need and negotiate with us. Merger agreement, maybe our original price.”

He said the merger would, in turn, create “a true national low-price competitor” for the big four U.S. airlines, American Airlines, Delta Air Lines, United Airlines and leading discounter Southwest Airlines.

The Frontier-Spirit Airlines combination, though small, will create the largest deep discounter in the U.S. as domestic leisure travel recovers from the Covid-19 pandemic. Under the Frontier deal, Spirit investors will receive 1.9126 Frontier shares and $2.13 per Spirit share in cash. Frontier shareholders will own 51.5% of the combined company.

Spirit has said JetBlue’s bid could be compromised by a federal lawsuit against its alliance with American Airlines in the northeastern U.S., and that its board didn’t consider financial details after it determined it had little chance of getting regulatory approval. JetBlue said there was “no factual or legal basis” for asserting that the antitrust lawsuit against the Northeastern Alliance could have been a factor in the takeover offer.

spiritual link

JetBlue took aim at Spirit’s ties to Bill Franke, the self-proclaimed father of superdiscounts whose Indigo Partners owns a majority stake in Frontier. Franke, Frontier’s chairman, led Spirit’s transformation into an ultra-discount company about 15 years ago, and in 2013 used the proceeds from the sale of Indigo’s 17% stake in Spirit to buy Frontier’s bankruptcy and transform the airline into an ultra-low-cost model .

JetBlue alleges that Spirit’s board “puts its own interests and its personal relationship with Frontier ahead of the interests of its shareholders.”

The Spirit deal would give JetBlue an organization and management team highly focused on controlling operating expenses, and the company has been a favorite of Wall Street analysts for most of its 23-year history. JetBlue failed in its only other acquisition attempt when it was outbid by Alaska Air Group Inc. in 2016 to overtake Virgin America.

(updated opening stocks in third paragraph)

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