If anything can be said about JetBlue Airways JBLU, it would be that it doesn't easily give up. The airline has offered yet another upgrade to its acquisition bid for Spirit Airlines Inc. SAVE, which is still focused on merging with Frontier Airlines, a unit of Frontier Group Holdings Inc. ULCC.
What Happened: In a Tuesday letter to Spirit shareholders, JetBlue CEO Robin Hayes declared his company’s “already superior proposal” would be sweetened with an “increased accelerated prepayment to $2.50 per share, structured as a cash dividend to Spirit shareholders promptly following the Spirit shareholder vote approving the combination between Spirit and JetBlue (subject to CARES Act limitations).”
Hayes insisted the upgraded offer results in a “superior all-cash price of at least $33.50 per Spirit share representing a substantial premium of 52.1% above the implied value of the amended Frontier transaction and guaranteeing certain value.”
Hayes also promised an “enhanced reverse break-up fee of $400 million payable to Spirit in the unlikely event the transaction is not consummated for antitrust reasons,” along with a ticking fee mechanism designed to provide shareholders with monthly pre-payments of 10-cents per share between January 2023 and the date when JetBlue’s offer is either consummated or terminated.
“This represents an estimated aggregate ticking fee of up to $1.80 per share, of which the first $1.15 per share in payments will offset the reverse break-up fee or the merger consideration,” Hayes continued.
“Any payments in excess of the $1.15 per share will be incremental to the total purchase price of $33.50 or the reverse break-up fee. This increases the total transaction consideration to up to $34.15 per share in the event the transaction is consummated and total downside protection to $4.30 per share, or approximately $470 million in the aggregate, in the event the transaction is terminated.”
Hayes wrapped his sales pitch by berating the “entrenched Spirit Board” whom he accused of “clinging to the inferior Frontier transaction with pie-in-the-sky promises and an overly simplistic regulatory argument. Their pitch to shareholders simply doesn’t add up.”
What Else Happened: Hayes isn’t the only airline industry executive writing letters to Spirit’s shareholders. Frontier’s Chairman of the Board William A. Franke joined President and CEO Barry Biffle in their own message.
“JetBlue has thrown up a lot of smoke to have you believe that the regulatory risk of its proposal is identical to the Frontier-Spirit combination,” they wrote.
“That is not true, and requires you to ignore common sense and JetBlue’s own admission about what it intends to do immediately upon acquiring and eliminating Spirit: remove seats and raise prices, both antitrust non-starters. Conversely, a Spirit-Frontier merger is demonstrably pro-consumer, as many analysts and third parties have already acknowledged, given that it will expand ultra-low fare service to more destinations and provide more ultra-low fare alternatives to the Big Four and JetBlue.”
Franke and Biffle also played the union card, noting the Association of Flight Attendants and the Transport Workers Union (TWU) favored their airline’s offer over JetBlue’s proposal.
“Further, the TWU has publicly admonished JetBlue for being an abusive employer that disregards the well-being of its workforce by refusing to abide by its existing union contracts,” they added. “An airline’s team members are absolutely essential to its success as a company. There is a stark contrast in how employees would react to the Frontier-Spirit combination compared to a potential acquisition by JetBlue.”
As for Spirit, JetBlue’s hard sell didn’t seem to crack their resolve. On June 24, the company signed a second amendment to its merger agreement with Frontier while its board of directors reiterated its unanimous recommendation for a Frontier merger.
“We are thrilled to announce the terms of Spirit’s amended agreement with Frontier, which includes nearly double the per-share cash consideration of our prior agreement with Frontier while still allowing stockholders to benefit from the economic upside of airline industry recovery,” said Ted Christie, president and CEO of Spirit.
“As this recovery progresses and demand returns, the price of the combined airline’s stock is expected to exceed the per-share price of JetBlue’s fixed, all-cash offer. We urge stockholders to vote for the merger agreement with Frontier on the white proxy card prior to the June 30 special meeting.”
SAVE Price Action: Spirit shares were trading 3.94% higher at $23.46 premarket Tuesday.
Photo courtesy of JetBlue.
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