The board of directors is not going to be involved in the purchase of Spirit Airlines by JetBlue.
In February of 2022, it was announced that Frontier Airlines was going to acquire Spirit Airlines. In April of 2022, the airline made a bid to acquire the airline in what it said was a superior proposal. The offer isn't better in theory, but it provides more uncertainty, and that's why Spirit rejected it.
The catch is that Spirit has concerns about getting regulatory approval for the merger, which is almost unarguably better on paper. Regulators would view these two deals differently if Spirit views them differently. The merging of two ultra low cost carriers is different from the merging of an ultra low cost carrier with a bigger budget.
Even after the initial offer, JetBlue tried to provide more assurance by offering a $200 million reverse break-up fee that would become payable to Spirit in the event that the JetBlue transaction wasn't finalized due to antitrust reasons.
Being paid $200 million for the deal not closing would be better than nothing. At that point, there is a chance that the Frontier deal wouldn't happen, or that Frontier could lower its bid since there would be less competition. I can appreciate his concern.
The open letter published by the airline questions the motives of the board of directors. It is interesting to read that this is an unconventional approach for an airline to take. The letter was written in part.
We believe the Spirit Board of Directors has failed to act in your best interests by refusing to engage constructively on our clearly superior proposal to acquire Spirit.
JetBlue offers more value – a significant premium in cash – more certainty, and more benefits for all stakeholders. Frontier offers less value, more risk, no divestiture commitments, and no reverse break-up fee, despite more overlap on non-stop routes and their own regulatory challenges.
Yet the Spirit Board failed to provide us the necessary diligence information it had provided Frontier and then summarily rejected our proposal, which addressed its regulatory concerns, without asking us even a single question about it. The Spirit Board based its rejection on unsupportable claims that are easily refuted.
Ask yourself a simple question: why won’t the Spirit Board engage with us constructively? The interests of Bill Franke’s Indigo Partners and the long-standing relationships between the two companies is the obvious answer.
Given the Spirit Board’s unjustified refusal to engage, we have decided to bring our proposal directly to the Spirit shareholders, and we urge you to vote “AGAINST” the Frontier transaction at Spirit’s upcoming special meeting. This will send a message to the Spirit Board that you want it to negotiate with us in good faith.
While trying to woo Spirit shareholders, JetBlue has reduced its offer. The airline initially offered $33 per share.
The airline is promising $30 per share. If Spirit shareholders vote against the transaction with Frontier and the Board negotiates in good faith, JetBlue will work towards a consensual transaction at $33 per share.
I'm not sure if I understand why the two airlines don't seem like a good fit. The best bet for JetBlue would have been to acquire Virgin America a long time ago.
The airline wrote a letter to the shareholders of the company asking them to vote against Frontier's takeover bid. The airline stated that it will still offer $33 even though it has decreased its offer from $33 to $30 per share.
If there is no regulatory approval, the airline should increase its break-up fee. I believe that there is a significant risk there.
What do you think about the strategy of the airline?
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