JetBlue and Frontier Airlines’ bidding war for Spirit Airlines continued on Monday, with JetBlue offering an upfront payment of $1.50 per share to Spirit stockholders.
JetBlue continues its push to persuade Spirit shareholders to vote no in a June 10 proxy vote on Spirit’s proposed sale to its ultralow-cost competitor Frontier.
Under the new offer, JetBlue would pay a total of $31.50 per share to Spirit investors, including a dividend of $1.50 upon a vote of Spirit shareholders approving a JetBlue/Spirt merger. Overall, JetBlue is now offering to pay a reverse breakup penalty of $350 million to Spirit if a merger agreement between the companies were to be blocked by antitrust regulators at the Justice Department, up from the carrier’s previous offer of $200 million. JetBlue’s $1.50-per-share upfront payment to Spirit shareholders would go toward that reverse break-up fee.
The upfront payment, which amounts to approximately $164 million, also appears to address accusations from Spirit’s leadership that JetBlue isn’t actually interested in acquiring Spirit, but instead is merely angling to block a merger between Spirit and Frontier.
“This offer reflects the seriousness of our commitment and underscores our confidence in completing this transaction,” JetBlue CEO Robin Hayes wrote in a letter to the Spirit board. “Additionally, given the similar regulatory risks of the two transactions and the increased reverse breakup fee we are prepared to provide, we believe our improved proposal remains a superior proposal by any measure.”
JetBlue’s latest offer follows a June 2 announcement by Frontier and Spirt that they had renegotiated their offer to include a $250 million reverse termination fee to be paid by Frontier if regulators were to block the proposed merger.
Overall, the offer calls for Frontier to pay Spirit investors with 1.9126 shares of Frontier stock, plus $2.13 for each of their Spirit shares.
Frontier stock was trading at approximately $10.10 late Monday morning, making the value of Frontier’s offer approximately $21.40 per share.
Spirit’s board has contended that the Frontier offer is the better one despite the lower purchase price because a merger with JetBlue would have little chance of being approved by the Justice Department. The DOJ is already suing to break up the Northeast Alliance, a JetBlue-American Airlines partnership. And Spirit argues that regulators would be more concerned about a merger of a higher-cost airline like JetBlue with a ultralow-cost carrier than a merger between two ultralow-cost carriers.
In a statement Monday, Spirit said its board will consider JetBlue’s newest offer in concert with legal and financial advisors.
“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 said.
Though JetBlue upped its reverse termination fee on Monday and included an upfront payment, the carrier also appeared to move away from previous statements that it is willing to pay as much as $33 per share to acquire Spirit under a negotiated agreement.
“In a negotiated transaction Spirit stockholders would receive total aggregate consideration of $31.50 per share in cash,” Hayes wrote in his letter.
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