DALLAS – JetBlue (B6) has submitted a proposal to Spirit Airlines’ (NK) board of directors to buy the yellow carrier for US$33 per share in cash, implying a fully diluted equity value of US$3.6bn and providing “full and certain value” to NK shareholders.
The offer provides a 52% premium over NK’s undisturbed share price on February 4, 2021, and a 50% premium over NK’s closing share price on April 4, 2022. B6 is confident that its offer meets the criteria for a “better proposal” under NK’s merger agreement with Frontier (F9) and that it is the most appealing option for NK’s shareholders.
Via a press release, the Long Island City, New York-based airline says the combination of the two airlines would position it as “the most compelling national low-fare challenger to the four large dominant U.S. carriers” by accelerating the reach of its “JetBlue Effect,” which the airline says occurs when “legacy carriers react to JetBlue’s unique combination of low fares and award-winning customer service.”
Basically, B6 contends it triggers significantly greater fare decreases from legacy airlines when it enters a new market than when ultra-low-cost carriers do the same.
A Compelling Argument?
For the last two decades, airline mergers have resulted in the four largest US carriers controlling more than 80% of the domestic market, which according to B6 is to the detriment of consumers. The merger of B6 with NK would indeed establish the fifth largest domestic airline: a low-fare alternative to the ‘Big Four’.
The merger would also result in increased job growth and opportunities for B6 crew members, as well as a stronger commitment to New York and Florida and a wider reach for the carrier’s sustainability efforts.
JetBlue adds that shareholders would benefit From B6’s financial stability, revenue growth, and profitability; “Expected to Deliver Run-Rate Operational Synergies of $600-700 Million and to be Accretive to EPS in Year One.”
Will Spirit Bite?
Spirit Airlines announced it had received from B6 the unsolicited proposal for the acquisition of the outstanding shares of the Miramar, Florida-based airline’s common stock in an all-cash transaction.
According to its own press release, the Spirit Board of Directors will now consider B6’s proposal in accordance with its fiduciary responsibility, working with its financial and legal advisors to decide the best course of action for Spirit and its stockholders.
In accordance with the provisions of the company’s merger agreement with F9, the board will perform this evaluation and “respond in a timely manner.” NK says there is no need for its shareholders to take any immediate action.
As announced on February 7, 2022, NK entered into a merger agreement with Frontier Group Holdings, Inc., the parent company of Frontier Airlines (F9) under which NK and F9 would combine in a stock and cash transaction.
Under the terms of the merger agreement, Spirit equity holders would receive 1.9126 shares of Frontier plus US$2.13 in cash for each existing NK share they own. The transaction is subject to customary closing conditions, including completion of the regulatory review process and approval by NK stockholders.
Combined, B6 and NK would serve more than 150 destinations. Do you think this acquisition will go through? Leave your comments below or on our SM channels!
This is a developing story.
Featured image: jetBlue N2048J Airbus A321-271NX. Photo: Andrew Henderson/Airways