Spirit snubs JetBlue's $3.6B takeover bid, prefers Frontier

Pilot shortage forces airlines to ground flights this summer

FOX Business’ Jeff Flock reports from Philadelphia International Airport, where major airlines need to hire 14,500 pilots per year in order to keep up with a nationwide shortage.

Spirit Airlines rejected a $3.6 billion takeover offer from JetBlue Airways after determining it is not a superior proposal to its previous agreement to merge with Frontier Airlines.

TickerSecurityLastChangeChange %
JBLUJETBLUE AIRWAYS CORP.11.01-0.40-3.51%
SAVESPIRIT AIRLINES INC.21.53-2.09-8.85%
UGCCn.a.n.a.n.a.n.a.

Under JetBlue's proposal, Spirit shareholders would receive $33 in cash per common share, a 47% premium to the value of Frontier's transaction as of April 29 and a 52% premium to Spirit's stock price as of Feb. 4.

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JetBlue's offer included a commitment to divest some assets in order to win regulatory approval and a $200 million break-up fee in the event that the transaction is not consummated for antitrust reasons. 

"Spirit shareholders would be better off with the certainty of our substantial cash premium, regulatory commitments, and reverse break-up fee protection. The Frontier transaction has a similar regulatory profile to ours but offers no divestiture commitment and no reverse break-up fee, while the uncertain value of Frontier’s stock exposes Spirit shareholders to significant risk," JetBlue CEO Robin Hayes said in a statement. "We hope the Spirit Board will now recognize that ours is clearly a superior proposal and engage with us more constructively than they have to date."

However, after a review by Spirit's board, the Miramar, Florida-based airline determined that the deal involves "an unacceptable level of closing risk" that would be assumed by its shareholders. It noted that obtaining regulatory approval from the Justice Department would be difficult due to concerns about JetBlue's Northeast Alliance (NEA) with American Airlines stifling competition.

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"Spirit believes that merging with Frontier will enable the combined ULCC business to achieve scale, improve operational reliability, have increased relevance to consumers, and do an even better job of delivering ultra-low fares to more consumers and competing more effectively against the Big 4 carriers, as well as against JetBlue," Spirit Airlines board Chairman Mac Gardner said in a letter to Hayes. "We believe that is a clear, pro-consumer narrative that will resonate more successfully with DOJ than a combination with JetBlue, which would eliminate the largest ULCC and remove significant low-cost/low-fare capacity."

Frontier's transaction with Spirit is expected to close in the second half of 2022, subject to regulatory and shareholder approval and customary closing conditions. The cash and stock deal, on a combined basis, is expected to produce annual revenues of $5.3 billion and synergies of $500 million once the deal is complete.

The deal will create the nation's fifth-largest carrier and give travelers more options to fly to mid-sized cities as well as underserved regions.

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