The proposed acquisition of Spirit Airlines by Frontier Airlines, which was announced on February 7, 2022, and has since faced regulatory scrutiny, has suddenly become more complicated. Today, JetBlue has become a new suitor, promising a “superior proposal”.
On Tuesday (April 5, 2022), JetBlue announced that they too are interested in acquiring Spirit Airlines, promising a “superior proposal” vis-à-vis Frontier Airlines’ February 7, 2022 bid to acquire the Miramar, Florida-based low-cost carrier (LCC). JetBlue’s offer, which was submitted to the Spirit’s Board of Directors today, was for the acquisition of the airline for $33/share in cash, a 52 percent premium to Spirit’s February 4th price, and a 50 percent premium to Spirit’s April 4, 2022, closing price. The proposal implies a fully diluted equity value for Spirit Airlines of $3.6 billion.
In Tuesday’s announcement, JetBlue’s CEO, Robin Hayes, said,
“Customers shouldn’t have to choose between a low fare and a great experience, and JetBlue has shown it’s possible to have both. When we grow and introduce our unique value proposition onto new routes, legacy carriers lower their fares and customers win with more choice. The combination of JetBlue and Spirit – coupled with the incredible benefits of our Northeast Alliance with American Airlines – would be a game changer in our ability to deliver superior value on a national scale to customers, crewmembers, communities, and shareholders. The transaction would accelerate our strategic growth and create sustained, long-term value for the stakeholders in both companies.
“While JetBlue and Spirit are different in many ways, we also have much in common, including a focus on keeping our costs low so we can profitably expand and offer an attractive alternative to the dominant ‘Big Four’ airlines. We would conduct a full review of Spirit’s product offering, operational and customer technology, and talent pool to optimize the combined airline.
“Our Northeast Alliance with American Airlines has supercharged our growth in New York and Boston, unlocking opportunities for us to grow where we could not have before. We view a combination with Spirit as perfectly complementing the NEA. These strategic moves aim to increase our relevance and bring the JetBlue competitive effect to more places while deepening our roots in the communities we call home. Throughout the pandemic, Florida has been a bright spot for JetBlue, and this would offer us the opportunity to hire even more crewmembers in the state, increase service in FLL and MCO for our customers, and further expand our training and support center footprint.”
JetBlue believes that their combination with Spirit would position the carrier as the most compelling low-fare U.S challenger to the four large legacy carriers, and that the “JetBlue Effect” would trigger significantly greater fare reductions from the legacy carriers when it enters a new market compared to when an ULCC like Frontier Airlines enters a market.
Frontier Airlines’ original February 7, 2022 bid for Spirit called for Spirit equity holders to receive 1.9126 shares of Frontier, plus $2.13 in cash for each existing Spirit share they own. At the time, the deal implied a value of $25.83 per Spirit share based on Frontier’s closing stock price of $12.39 on February 4, 2022, representing a 19 percent premium over Spirit’s February 4th closing price, and a 26 percent premium based on the 30 day weighted average prices of Spirit and Frontier.
JetBlue intends to fund the proposed transaction with cash on hand and debt financing led by Goldman Sachs & Co. LLC.
In a separate press release on Tuesday (April 5, 2022) Spirit Airlines announced that they have received JetBlue’s unsolicited proposal to acquire all of Spirit’s outstanding shares for $33.00/share in cash.
Spirit’s statement on Tuesday afternoon (April 5, 2022), read in part,
“…Consistent with its fiduciary duties, the Spirit Board of Directors will work with its financial and legal advisors to evaluate JetBlue's proposal and pursue the course of action it determines to be in the best interests of Spirit and its stockholders. The Board will conduct this evaluation in accordance with the terms of the Company's merger agreement with Frontier and respond in due course. Spirit shareholders do not need to take any action at this time.
“As announced on February 7, 2022, Spirit entered into a merger agreement with Frontier Group Holdings, Inc. ("Frontier") (NASDAQ: ULCC), parent company of Frontier Airlines, Inc., under which Spirit and Frontier would combine in a stock and cash transaction. Under the terms of the merger agreement, Spirit equity holders would receive 1.9126 shares of Frontier plus $2.13 in cash for each existing Spirit share they own. The transaction is subject to customary closing conditions, including completion of the regulatory review process and approval by Spirit stockholders…”
Barclays and Morgan Stanley & Co. LLC are serving as financial advisors to Spirit and Debevoise & Plimpton LLP is serving as legal advisor.
Miramar, Florida-based low-cost carrier Spirit Airlines (NYSE: SAVE) is committed to offering the best value in the sky with service to destinations in the U.S., Latin America, and the Caribbean. The airline allows customers to select and pay for only the products and services they want, something they call “À La Smarte.” Spirit also operates one of the youngest and most fuel-efficient fleets in the U.S. The carrier proudly calls their youthful fleet of aircraft their “Fit Fleet®.” Spirit Airlines will add 24 new fuel-efficient Airbus A320neos to their fleet in 2022.
JetBlue is ‘New York’s Hometown Airline®’ and a leading carrier in Boston (BOS), Fort Lauderdale (FLL), Los Angeles (LAX), Orlando (MCO) and San Juan (SJU). The airline carries guests to destinations across the U.S., Caribbean, Latin America and London (Heathrow and Gatwick). JetBlue Airways Corporation trades on the NASDAQ under the ticker symbol JBLU.
Source(s): JetBlue Airways/Businesswire, Spirit Airlines/PRNewswire