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JetBlue To Launch a Hostile Takeover of Spirit Airlines

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Discount airline JetBlue will try to navigate its way around the usual buyout rules by launching a hostile bid to take over rival Spirit Airlines.

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Spirit rejected an earlier takeover bid by JetBlue because it favored a different merger offer from Frontier Airlines, CNN reported. In response, JetBlue will try to persuade Spirit shareholders to accept an all-cash offer of $30 per share and reject the Frontier deal.

In a lengthy letter sent to Spirit shareholders on Monday, May 16, JetBlue CEO Robin Hayes said Spirit’s board of directors “has failed to act” in their interests by refusing to engage constructively on JetBlue’s “clearly superior proposal” to acquire Spirit.

“JetBlue offers more value – a significant premium in cash – more certainty, and more benefits for all stakeholders,” Hayes wrote. “Frontier offers less value, more risk, no divestiture commitments, and no reverse break-up fee, despite more overlap on non-stop routes and their own regulatory challenges.”

JetBlue added that its $30-per-share cash deal represents a 60% premium to the value of the Frontier transaction as of May 13, 2022.

In early April, Spirit rejected a $33-a-share cash offer from JetBlue because it didn’t believe a JetBlue merger would get regulatory approval. Spirit went on to say that “given this substantial completion risk, we believe JetBlue’s economic offer is illusory.”

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The Spirit board instead decided to stay with a cash-and-stock agreement it reached with Frontier in January. At the time, that deal was valued at $25.83 for each Spirit share, but Spirit’s stock price has since declined. It now trades near $19 after pushing higher in early trading Monday on the JetBlue news.

In a statement two weeks ago, Spirit said it believes merging with Frontier “will enable the combined ultra-low cost carrier 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 Four carriers, as well as against JetBlue.”

While JetBlue and Spirit jockey for the hearts of shareholders, regulators and lawmakers have other ideas about any major airline mergers.

JetBlue is already battling an antitrust lawsuit by the U.S. Department of Justice that aims to nullify an alliance between JetBlue and American Airlines in the Northeast, The New York Times reported. One official referred to that deal as a “de facto merger.”

The proposed Spirit-Frontier deal has also been criticized by lawmakers such as Sen. Elizabeth Warren (D-Massachusetts) and Bernie Sanders (I-Vermont), who warn that the merger could lead to higher ticket prices and diminished customer service.

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The NYT noted that a combined Frontier and Spirit would control more than 8% of the U.S. airline market, while a combined JetBlue and Spirit would control more than 10%.

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