JetBlue appears determined to acquire Spirit, with a new and improved offer just days ahead of a Spirit Airlines shareholder vote on whether Spirit should merge with Frontier or JetBlue.
Third Time Is A Charm? JetBlue Ups Offer For Spirit Airlines With New Shareholder Prepayment And Higher Reverse Break-Up Fee
The new offer was sent to the Spirit Airlines Board of Directors this morning and includes:
- Enhanced reverse break-up fee: JetBlue would provide a $350 million ($3.20 per Spirit share) reverse break-up fee, payable to Spirit in the unlikely event the transaction is not consummated for antitrust reasons.
- 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.
- 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.
JetBlue insists that a Spirit – JetBlue merger would be good for competition, creating a viable national competitor to American, Delta, and United. JetBlue CEO Robin Hayes argued:
“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.”
(you can view his full letter here)
The same anti-trust concerns are likely to persist, however. The Spirit Board will consider this proposal ahead of the shareholder meeting.
JetBlue appears desperate to absorb Spirit Airlines in order to be able to grow. The latest offer provides an even more generous offer than Frontier and seeks to incentivize stockholders with a $1.50 “advance” to Spirit Airlines stockholders and increase the reverse break-up fee to a degree in which JetBlue hopes Spirit might say, “What have we got to lose?”
My hunch is Spirit Airlines will turn down this offer for the same reason the earlier offers have been turned down, but how the stockholders will vote is a whole different matter.