In a surprising twist, Spirit Airlines shareholders vote down the proposed merger with Frontier, clearing a path for JetBlue’s tender offer and acquisition.
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Spirit Shareholders Vote Down Merger With Frontier
In a shocking vote, Spirit shareholders voted against a merger with Frontier. The options put before shareholders was a vote for or against the merger agreement as sanctioned by Spirit’s board and did not represent options to either remain independent nor to become acquired by JetBlue. The combined company would have created a $6 billion airline, the fifth-largest in the US and the nation’s largest discount carrier.
In a feverous back-and-forth, competing bids both from Frontier and from JetBlue placed Spirit as the coveted prize in a battle for the Miramar, FL-based carrier. The Frontier Airlines-Spirit Airlines merger announced in February initially proposed (7) Frontier board seats for the combined new entity, (5) going to Spirit with no breakup fee if the merger did not secure regulatory approval.
More than four revisions have occurred since then with JetBlue’s offer including an all-cash acquisiton offer for Spirit by JetBlue Airways. The Spirit Board of Directors rebuffed each JetBlue offer though it provided due diligence materials to both carriers. Its concern boiled down to the likelihood of a deal being consummated, and Spirit’s concern stems from two areas: long-term shareholder value, and regulatory approval.
Spirit’s board indiciated that the target price for the combined carrier with a Frontier-Spirit merger would achieve $50/share over the next few years according to outside analysts, a better deal for shareholders. It’s regulatory concern was also due to both overlap of current routes, and JetBlue’s codeshare agreement with American Airlines under the so-called Northeast Alliance (NEA.) JetBlue is being sued by the DOJ who wishes to dismantle the partnership.
This back-and-forth exchange that has elevated both the price paid for Spirit and the breakup fee is a deal is not approved by the Biden administration regulators by both JetBlue and matched by Frontier. The breakup fee, added by JetBlue initially to assauge fears of a regulatory nature, has risen from $200 million to $350 million by both carriers before JetBlue placed a last-ditch $400 million on the table including an agreement to pay Spirit shareholders this portion early before regulatory approval is confirmed.
Despite nearly weekly headlines in June 2022 that read, “JetBlue raises its offer”, Barry Biffle’s Frontier was able to match each offer and retain Spirit’s board approval.
Shareholders voted this down despite backing from the board.
JetBlue Acquisition Likely To Go Ahead
While the shareholder vote for a merger between Spirit and Frontier was voted down, an acquisition by JetBlue was not voted for by Spirit shareholders. That said, the tender offer which sits at $33.50/share with $400 million paid to shareholders in a breakup fee if the deal does not pass regulatory hurdles remains on the table. A vote by shareholders against the merger paves the way for consideration and a proposed tender offer by JetBlue to Spirit shareholders for airline.
The airline can still remain independent, though that seems unlikely as shareholders appear poised to cash in on their shares.
Later in the week, I will have more on the likelihood of that deal being consummated but for now, the board still has not approved of the JetBlue offer either – all three carriers involved remain separate carriers.
Though it’s been an intense battle with bags of cash being thrown around, my thought was that shareholders would favor a larger Ultra Low Cost Carrier and stiff competition to the Big 4 network carriers with a Spirit-Frontier merger. With that now off the table, the JetBlue offer needs to be considered though I fear that JetBlue’s offer may diminish in value now that Frontier is no longer in the running.
What do you think? Did you expect this vote? Should Spirit stay independent or should shareholders take the money and run?
Not sure if I would call this shocking… the writing has been on the wall since June
Shocking ???? We’ve known this would 100% be the result
So with the news that Jetblue and Spirit are merging AA will most likely exit the NY market since the Northeast Venture with jetblue won’t be allowed to stand.
Looks like AA IS closer to bankruptcy/liquidation.
RIP the Northeast alliance! It wasn’t legal anyways, should have been blocked!
Time for UA to grab some JFK slots!
I was previously antucipating that after JFK T7 gets demolished, UA would move to T5 while B6 would give up some gates at T5 in exchange for T6 gates. Others speculate that UA will move to T1
Will this meaan that the combined airline will move to one of the redesigmed terminals at LGA or will they use the Marine Air terminal?
If… the deal is considered and approved by the boards, it would then face regulators which are not necessarily likely to approve the acquisition, and then it would move to slot and gate concessions (potentially) before consolidation of terminals and airports could be considered.
This wasn’t surprising at all. Also, I’m curious why you think JetBlue and Spirit will have trouble getting regulatory approval. The combined airline would still be smaller than any of the big four (and three of those airlines had much more problematic mergers from an antitrust perspective) so I can’t really see any antitrust or HSR issues. There will obviously be some slots moved around but, as you mentioned that’s different from obtaining regulatory approval for the deal to close and is probably already being taken into consideration by JetBlue’s merger/transition team.
Is it Sunday already?
lol – unfortunately not.
If you had been paying attention this is not shocking at all…
Let’s say Spirit and JetBlue merge. Assuming NO operational changes, JetBlue gains in the following airports:
One place where JetBlue will now have an interesting time is SFO. Spirit does not fly from there (NK uses OAK), so will JetBlue operate from both? Move all but the LAX, JFK/EWR, and FLL flights to OAK? Leave OAK and give Southwest the airport? I think if smart, JetBlue could really scale up in OAK and attract customers from Marin and the East Bay (not to mention Downtown SF is closer to OAK than SFO by BART).
Obviously there will be reductions at JFK; could United and JetBlue swap some JFK and SFO slots? Curious to hear what others think.
B6 would also be able to add about 2 dozen flights per day from spirit at ORD in addition to their current two. If they don’t I’m sure southwest would jump at the gate space
San Francisco isn’t a slotted airport. There’s nothing to swap?
Also why is it “obvious” there would be reductions at JFK? Spirit doesnt go there,a nd it has a miniscule presence at LGA.
Why is it obvious there would be reductions at JFK? Spirit doesn’t fly there and it only has a very small presence at LGA? Please explain? There’s nothing obvious.
Given the new size of the JetBlue operation, and especially with a Democratic administration, the simplest way to assuage regulators is to give up market share in competitive airports. Given Spirit’s decent growth at EWR as well, it (to me) seems more likely that B6 would need to lessen JFK slots as opposed to EWR/LGA to appease regulators. United could trade some EWR for JFK slots in a reversal of their 2015 deal with Delta too.
As others have pointed out, this isn’t “shocking,” yet it’s still great news. With B6 already having a sizeable presence in FLL, This flyer is hoping they’ll keep most, if not all of NK’s routes. If they do, they’ll provide a far more civilized alternative to the horrid Metrobus with wings that is WN.
It’s not “shocking” in the least: JetBlue backed a line of dumptrucks filled with case at Spirit’s door and kept dumping them. So, while the board may have resisted, the big shareholders (of course) are only interested in the money and JetBlue’s offers were each sweeter than the one before. The fact that Spirit will no longer exist in any form is of no care to the big shareholders, who will make a tidy profit here. And ultimately, that’s all that matters. Everyone else associated with the airline is screwed.
But “shocking” it is not. And it’s been heading this way for many weeks.
Where will this leave the JB-AA association?
There was nothing shocking about this vote. Companies don’t constantly delay shareholder votes if they know they’re going to prevail. The big questions now are: Did JetBlue pay too much, and is the deal going to pass regulatory muster?
The linked article doesn’t say that Spirit shareholders voted down the deal. It says “Spirit Announces Termination of Merger Agreement with Frontier”.
The decision by Spirit and Frontier to terminate their deal was announced while Spirit shareholders were still voting on the proposal.
There is no need for a 5th nation wide airline. JetBlue made the mistake of offering all cash instead of stock (wall paper) and cash. It will deplete its resources with an ensuing recession. The other airlines will enter a fare war to defend their turf and JetBlue will bleed like a pig.
This soooo reminds me of the Pam Am and National Airlines merger of 1980. The ensuing recession was brutal and Pam Am was required to start a fire sale of remaining assets and eventually dissolved in 1991.
This is what happens when you get with a cluster of MBA’s obsessing over obscure business formulas. What JetBlue needed was an adult in the room when all this was discussed.