JetBlue Continues The Fight in the Spirit Merger

Photo Credit: Joris Wendt/AviationSource

LONDON – JetBlue continues to fight against the proposed Frontier-Spirit merger. They recently released an announcement commenting on the upcoming “day of reckoning”.

The announcement


The announcement JetBlue made is the following:

“We continue to believe JetBlue’s proposal is decisively superior to the Frontier transaction, even considering its revised terms, and it continues to offer Spirit shareholders significantly more value, more cash, more certainty, and more regulatory protections.”

“JetBlue offers $33.50 per Spirit share in cash, a very significant 38% premium [compared to the $24.29 implied value of the Frontier amended transaction] to the implied market value of the amended Frontier transaction.”

“Also, importantly the incremental $2.00 per Spirit share offered by Frontier are effectively being paid by Spirit shareholders through their ownership in the combined company, therefore resulting in only approximately $1 of incremental economic value.”

“We will more thoroughly review and assess the revised terms of the Frontier-Spirit merger agreement, and we intend to continue our “vote no” campaign against the inferior Frontier transaction at the special meeting.”

“Since our initial proposal was made public on April 5, Spirit’s share price performance has reflected its shareholders’ overwhelmingly positive view of our offer, and their confidence in our ability to achieve regulatory clearance of the transaction, an outcome which remains supported by outside regulatory experts’ analysis.”

“The conflicted Spirit Board continues to rely on a series of mischaracterizations to justify an inferior deal – about the regulatory situation, that is at odds with the views of outside experts that our transaction can get done; about the Northeast Alliance, despite the overwhelming facts supporting its pro-competitive nature; and about the impact of the changing industry environment, including competition for pilots.”

“Adding to these misrepresentations, the Spirit Board is now claiming they have served their shareholders by accepting a revised Frontier proposal, an act which does not change the fundamental superiority of our transaction, agreeing, among other things, in exchange for underwhelming financial concessions, to weaken Spirit shareholders’ governance in the combined company through less board representation.”

Comments


While JetBlue continues to strike with the deal, it is getting clearer that with each day, Spirit does not want to merge with JetBlue.

While it might be an objectively better deal for Spirit to merge with JetBlue, Spirit, together with a proxy advisory firm, is deciding with who it shall be merging.

While the offer for JetBlue is the sweetest, the offer with Frontier is the one that offers more security, according to the firm ISS, who said that the deal includes a prepayment per share of $2.22 from Frontier versus the $1.50 per share offered by JetBlue.

Frontier has also increased its reverse termination fee to Spirit, from $100 million to $350 million according to CNBC.

Spirit also keeps on rejecting the offer, saying that there is a low likelihood that the U.S. regulators would approve the merger.

The fact that JetBlue continues to offer aggressively does not sit very well, as that means that they could have an ulterior motive for the possibly newly acquired airline.

While it is unthinkable, the fact that they have a so-called “vote no” campaign makes it feel a bit uncomfortable for the airlines involved. What looks like it’s happening is that JetBlue is involving itself in a conversation they were not invited in.

It would be a real shame if Spirit gave in to the temptation, either because they were a bit too tired or because they actually felt like they needed it.

This will also show whether an airline really goes after money or if they go for other values as well, such as a harmonized working environment and actually thinks about its employees.

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Arash Abed

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