Hostile bid follows rejection, drop in Frontier stock price
Not content to take no for an answer, JetBlue is making a hostile takeover bid to acquire Spirit Airlines. After Spirit’s board of directors rejected JetBlue’s $3.6 billion buyout offer, citing the difficulty of having federal regulators approve the acquisition, JetBlue is lobbying Spirit shareholders to reject a $2.9 billion stock-and-cash offer from Frontier in favor of their bid.
JetBlue has modified its cash offer to $30 per Spirit share instead of the $33 it initially offered. The airline said it would be willing to negotiate at the $33 price, though. Frontier’s offer was good for $25.83 per share of Spirit, but Frontier’s stock has since dropped, making the deal less appealing to Spirit shareholders at less than $20 per share.
JetBlue said Monday it is offering Spirit shareholders “a 60% premium to the value of the Frontier transaction.
“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,” JetBlue wrote in a letter to Spirit shareholders. “The Spirit Board based its rejection on unsupportable claims that are easily refuted.”
A major impetus for Spirit’s rejection of the JetBlue is the Justice Department’s lawsuit aimed at ending an agreement between JetBlue and American Airlines for an alliance on flights in the Northeast Corridor. Spirit’s board said there is no way regulators would allow a buyout by JetBlue as long as the agreement with American remains in place. JetBlue countered that the alliance is good for passengers and that when it launches a new route the competition brings fares down an average of 16%.
“We struggle to understand how JetBlue can believe (Department of Justice), or a court, will be persuaded that JetBlue should be allowed to form an anticompetitive alliance that aligns its interests with a legacy carrier and then undertake an acquisition that will eliminate the largest (ultra low-cost) carrier,” Spirit chairman Mac Gardner and CEO Ted Christie wrote in rejecting JetBlue’s $33 per share offer.
It didn’t convince the board, but JetBlue hopes Spirit shareholders think differently.