DALLAS – JetBlue (B6) really wants to buy Spirit Airlines (NK). It wants to acquire the discount carrier so badly that it has raised the stakes even higher in the bidding war for the carrier—the nation’s largest budget airline.
The AP is reporting that Spirit has raised its offer to US$33.50 per share, US$2 more per share than its offer last week. Spirit has 108.62 million shares outstanding. You do the math.
JetBlue is trying to outbid Frontier (F9), which agreed to buy Spirit in February. NK shareholders are scheduled to vote on the Frontier offer next week. But B6’s offer is an attempt to convince them to just say no and follow the money to B6.
JetBlue says this new offer is also a “67.6% premium to the implied value of the Frontier transaction as of June 17, 2022.”
That’s a lot of money.
JetBlue also says that this latest offer contains a stronger divestiture commitment, meaning that it will sell whatever assets are deemed necessary (both Spirit’s and JetBlue’s) to obtain regulatory approval – but with a “limited carve-out” for those actions so that its Northeast Alliance will not be affected. (For a great lesson in corporate PR writing, read about this divestiture here).
JetBlue investor relations says that “JetBlue’s proposal continues to include a proactive offer to the U.S. Department of Justice of a remedy package that contemplates the divestiture of all Spirit assets located in New York and Boston so, as a result of the transaction, JetBlue will not increase its presence in the airports covered by the Northeast Alliance, as well as gates and related assets at Fort Lauderdale.”
Continuing from the previous offer, JetBlue would pay Spirit a “reverse break-up fee” of $350 million if the deal were not approved due to antitrust reasons. And JetBlue would also issue a prepayment of $1.50 per share to Spirit shareholders immediately upon their vote to accept the B6 offer.
Going after the Big Four
“After discussions with the Spirit team last week and further due diligence review, we are more convinced than ever that a JetBlue-Spirit transaction would create a true national competitor to the Big Four and deliver value to all of our stakeholders,” said Robin Hayes, chief executive officer, JetBlue. “Together, we will deliver lower fares and a better experience to more customers.
“Our previous proposal was met with an extremely positive reaction from Spirit stockholders, and we believe they will be even more pleased with these improved terms, including additional regulatory commitments that reflect our confidence in our ability to obtain antitrust approval and are a direct result of our diligence,” he continued.
On June 20, JetBlue sent a letter to Spirit’s Board of Directors outlining the upgraded proposal. You can read that letter in full at the JetBlue website.
Featured image: jetBlue N2048J Airbus A321-271NX. Photo: Andrew Henderson/Airways