JetBlue Airways is not taking no for an answer from Spirit Airlines, now making a hostile tender offer directly to Spirit’s shareholders.
New York-based JetBlue on Monday made its second unsolicited bid to acquire Spirit and thwart its planned merger with rival ultra-low fare carrier Frontier Airlines of Denver. Spirit said in a statement it would review JetBlue’s new offer, which is required by its fiduciary responsibility to shareholders.
Miramar-based Spirit employs 3,400 people in South Florida and is the largest carrier at Fort Lauderdale-Hollywood International Airport.
JetBlue’s latest move is a hostile attempt to get Spirit’s stockholders to sell their stock for $30 a share in cash (a little more than $3.2 billion), and that would increase to its original offer of $33 a share if Spirit’s management and board cooperates.
The bid comes two weeks after Spirit announced its board rejected JetBlue’s offer and intended to go ahead to combine with Frontier to create the nation’s fifth-largest airline. In February, Spirit and Frontier announced they would merge, seeking to bring their cheap passenger fares from coast to coast.
Spirit has set a June 10 shareholder vote on its merger with Frontier and urged shareholders to approve the deal. JetBlue filed a proxy statement Monday to urge Spirit shareholders to “vote no” against the Spirit-Frontier union, calling the $2.9 billion cash-and-stock deal, “inferior, high risk and low value.”
“Given the Spirit Board of Directors’ complete unwillingness to share the same necessary diligence information that was shared with Frontier, JetBlue is now offering to acquire Spirit for $30 per share in cash through a fully financed tender offer,” JetBlue said in a statement, noting that its offer is a 60% higher premium than Frontier’s. “JetBlue is fully prepared to negotiate in good faith a consensual transaction at $33, subject to receiving necessary diligence.”
The Association of Flight Attendants, a national union which represents flight attendants from Spirit and Frontier, on Tuesday voiced support for the combination and said the union had reached a merger transition agreement with Frontier Holdings. Frontier would be the majority shareholder if the marriage with Spirit is completed.
Pilot and flight attendants’ unions play key roles in the aviation workforce. Airline industry analysts say that union negotiations and merging staffs with their seniority lists are among the most arduous parts of airline mergers and acquisitions.
“We are thrilled to announce our support for the merger of Spirit and Frontier Airlines after reaching a transition agreement that protects flight attendant jobs, assists with the AFA-CWA seniority integration that protects the bidding seniority each flight attendant has accrued prior to the merger, and paves the way for efficient contract bargaining that allows flight attendants to experience the benefits of the merger as soon as possible,” Sara Nelson, the president of the Association of Flight Attendants-CWA, said in a statement.
Early this month, JetBlue said it also was offering Spirit a $200 million break-up fee, if federal regulators would block its acquisition of the Broward County airline due to antitrust reasons. Ultimately, federal regulators would have to approve any deal Spirit and an airline partner agreed on. That evaluation would take at least 18 to 24 months.
Spirit and Frontier share a similar deep discount business model and have had overlapping executives and investors. Indigo Partners, a private equity group, first owned a controlling share of Spirit from 2006 to 2013, before selling its interest and buying the majority of Frontier. Last year, Indigo took Frontier public, selling shares to investors.
Frontier CEO Barry Biffle was Spirit’s chief marketing officer from 2008 to 2016. The co-founder of Indigo is chairman of Frontier’s board of directors, and some of Spirit’s directors have ties to Indigo. In a letter to Spirit’s shareholders, JetBlue claimed the “longstanding relationships” between Spirit and Indigo are why Spirit won’t engage in talks about a deal with JetBlue.
Airline industry analysts have said Spirit and Frontier have long been likely candidates for a merger, while JetBlue’s original bid in April for Spirit was a surprise.
Spirit’s stock jumped $2.31 a share Monday on takeover speculation, closing at $19.27. Frontier’s stock added $.51, closing at $9.23, while JetBlue shares fell $.61 to $9.45.