By Chase Hagl
JetBlue Urges Shareholders to Vote Against Frontier’s “Inferior” Offer
On Monday, JetBlue set in motion a second attempt to merge with Spirit — the ultra-low-cost carrier — through the means of a hostile takeover. This is the carrier’s second attempt to win over Spirit’s shareholders.
The move from JetBlue comes just weeks after their initial offer was rejected by Spirit’s Board of Directors due to the “unacceptable level of closing risk” highlighted by the carrier.
The Long Island, N.Y.-based carrier’s new offer proposes $30 per share in cash, an offer equivalent to $3.2 billion, to Spirit stockholders. The most recent offering has a reduced price due to Spirit’s unwillingness to share financial information. Although lower, JetBlue said its April 5 offer of $33 per share is still available and states they are open to “negotiate in good faith a consensual transaction at $33, subject to receiving necessary diligence.”
JetBlue’s initial $3.6 billion bid was rejected by Spirit’s board on May 2, as it was unlikely that the deal was capable of clearing antitrust regulators. The merger also faces scrutiny from the ‘Northeast Alliance’ pursued by JetBlue and American Airlines. This alliance is under the microscope of the U.S. Government which has since sued to stop said deal from happening.
Spirit said its board would “carefully” review JetBlue’s offer with plans to inform shareholders of the board’s decision within 10 business days. In the meantime, Spirit has encouraged its shareholders to take no action at this time.
JetBlue remains in a bidding war with Frontier Airlines. Spirit shareholders are scheduled to vote on June 10 on the Frontier bid, which is favored unanimously by the Spirit board. Compared to JetBlue’s current $3.2 billion offer, Frontier’s cash-and-stock offer was valued at $2.9 billion when initially announced in February, however, Frontier’s shares have dropped 30 percent since, reducing the value of the deal.
Amid the hostile takeover bid for Spirit, JetBlue asked shareholders of the low-cost carrier to reject a proposed acquisition by Frontier.
In a letter to Spirit shareholders, JetBlue’s CEO Robin Hayes said, “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 nonstop routes and their own regulatory challenges.”
Hayes goes on to state, “Acquiring Spirit has been a strategic objective of JetBlue for many years and, as such, we were disappointed that the Spirit Board of Directors (the “Spirit Board”) elected not to have any discussions with us prior to the announcement of Spirit’s transaction with Frontier Group Holdings, Inc. (“Frontier”).”
In a rather interesting attempt to make a case to Spirit shareholders, JetBlue launched a website, giving individuals the opportunity to vote against the Frontier deal. Through overuse of the words, “Inferior” and “Superior”, the question still remains whether or not this will be effective for JetBlue’s efforts in taking over Spirit.