LONDON – JetBlue has today submitted yet another improved proposal to Spirit Airlines as the eagerness continues to acquire the ultra-low-cost carrier.
Three Important Elements…
Under the new proposal, the following three elements stick out:
- Enhanced reverse break-up fee: JetBlue would provide a $350 million ($3.20 per Spirit share1) reverse break-up fee, payable to Spirit in the unlikely event the transaction is not consummated for antitrust reasons. This represents an increase of $150 million, or $1.37 per Spirit share, to the reverse break-up fee JetBlue has previously offered to pay and is $100 million greater than the amount being offered by Frontier.
- Accelerated prepayment of $1.50 per share: JetBlue would prepay $1.50 per share in cash (approximately $164 million) of the reverse break-up fee, structured as a cash dividend to Spirit stockholders promptly following the Spirit stockholder vote approving the combination between Spirit and JetBlue.2
- Superior, all-cash premium: JetBlue’s proposal offers Spirit stockholders aggregate consideration of $31.50 per share in cash, comprised of $30 per share in cash at the closing of the transaction and the prepayment of $1.50 per share of the reverse break-up fee.
Robin Hayes, the CEO of JetBlue continued on the line of the combination creating a true national competitor to the dominant legacy carriers:
“Combining JetBlue and Spirit would create a true national competitor to the dominant legacy carriers, delivering low fares and a great experience for more customers, more opportunities and good-paying jobs for crew members, and more value for stockholders.”
“The key features of our Improved Proposal – the up-front cash payment and increased reverse break-up fee – reflect the seriousness of our commitment and underscore our confidence in completing this transaction.”
“Additionally, given the similar regulatory risks of the two transactions and the increased reverse break-up fee we are prepared to provide, we believe our Improved Proposal remains a Superior Proposal by any measure.”
JetBlue Remain Committed, Spirit Urges Rejection…
Spirit Airlines has urged shareholders earlier last month to reject JetBlue’s hostile takeover bid over the perspective that the deal would hurt shareholders in the company.
Commenting on this at the time was Mac Gardner, the Spirit Chair of the Board of Directors:
“JetBlue’s tender offer has not addressed the core issue of the significant completion risk and insufficient protections for Spirit stockholders.”
“Based on our own research and the advice of antitrust and economic experts, our view is that the proposed combination of JetBlue and Spirit lacks any realistic likelihood of obtaining regulatory approval, while our company faces a long and bleak limbo period as we await resolution.
In that scenario, a $1.83 per share reverse break-up fee will not come close to adequately compensating Spirit stockholders for the significant business disruption Spirit will face during what JetBlue acknowledges will be a protracted regulatory process.”
“Our pending merger with Frontier is advancing as planned, and we continue to recommend that Spirit stockholders vote FOR the merger with Frontier on June 10th, as we believe the combination of these two ULCCs is the best way to deliver maximum value to Spirit stockholders.”
It remains clear at this stage as well that Gardner is just as committed to getting this deal across the line as Hayes is to stealing this from Frontier’s grasp.
So What Happens Now?
The expectation from the Spirit side of things is that the merger with Frontier will now be expected to be approved by Spirit shareholders.
Spirit has raised some serious concerns about the JetBlue deal, which should be enough to get the airline to back off now, irrespective of any financial value.
Looking ahead, it will be interesting to see whether this will be the last offer made by JetBlue, or whether they will try another tact before Spirit shareholders formally approve the Frontier merger.