DALLAS - Spirit Airlines (NK) announced today that its Board of Directors has rejected jetBlue's (B6) unsolicited acquisition proposal, claiming the proposed transaction is not reasonably capable of being co-financed.

After consulting with outside financial and legal advisors, NK's Board unanimously determined that the unsolicited proposal received from B6 did not constitute a "Superior Proposal" as defined in NK's merger agreement with Frontier Airlines' (F9) parent company, Frontier Group Holdings, Inc.

As a result, NK's Board continues to think that the planned deal with F9 represents the best opportunity to maximize value and strongly advises NK shareholders to approve the merger agreement with F9.

jetBlue Enhances the Deal

JetBlue did not budge. B6 also released a statement today announcing that it had upgraded its proposal to NK's Board to buy all of Spirit's outstanding common stock for US$33 in cash per share. The long-island carrier says its enhanced proposal provides NK shareholders with greater financial value and predictability than the F9 transaction. B6 outlines its enhanced proposal as follows:

• Divestiture commitment: If necessary, B6 would agree to divest assets of B6 and NK up to a material adverse effect on NK, with a limited carve-out for actions that would adversely impact B6'd Northeast Alliance (NEA) with American Airlines (AA).
• Remedy package to address NEA and regulatory concerns: B6 would offer a remedy package that includes the divestiture of all NK assets in New York and Boston so that B6 does not increase its presence in the airports covered by the NEA. The package would also include gates and assets at other airports, including Fort Lauderdale.
• Reverse breakup fee: B6 would provide for a US$200m reverse break-up fee, representing approximately US$1.80 per NK share, that would become payable to NK in the unlikely event the B6 transaction is not consummated for antitrust reasons.
• Superior, all-cash premium: B6's proposal continues to offer NK shareholders US$33 in cash per common share, a 47% premium to the value of the F9 transaction as of April 29, 2022 (a), and a 52% premium to NK's share price as of February 4, 2022 (b) (the last trading day prior to the Spirit-Frontier announcement).

JetBlue adds that a B6-NK merger would create a more appealing national low-fare competitor to challenge the Big Four airlines, who dominate more than 80% of the US market.

The blue-tailed airline claims that when it delivers its blend of low fares and "award-winning service" to new routes, legacy carriers decrease their fares, and consumers benefit from increased choice. You can see B6's enhanced proposal slides here.

Comments from Spirit, jetBlue

Marc Gardner, Chairman of the Board of Directors for NK, also sent B6 a letter, stating that NK's Board continued "to believe in the strategic rationale of the proposed merger with Frontier" and that it was "confident that it represents the best opportunity to maximize long-term shareholder value."

Gardner added that "After a thorough review and extensive dialogue with JetBlue, the Board determined that the JetBlue proposal involves an unacceptable level of closing risk that would be assumed by Spirit stockholders. We believe that our pending merger with Frontier will start an exciting new chapter for Spirit and will deliver many benefits to Spirit shareholders, Team Members, and Guests."

JetBlue CEO Robin Hayes reiterated that “By creating a national competitor to the Big Four airlines, this transaction would deliver meaningful benefits for customers, superior value for shareholders of both airlines, and new opportunities for our combined crewmembers,"

“We have confidence that we can complete this transaction to bring more low fares and great service to more customers. A JetBlue-Spirit combination will deliver enhanced financial strength and accelerate revenue growth and profitability for JetBlue shareholders,” added Hayes.

Spirit's Next Steps

As previously stated on February 7, 2022, NK and F9 signed into a merger agreement in which the airlines would merge in a stock and cash transaction. NK equity holders would receive 1.9126 F9 shares plus US$2.13 in cash for each current NK share they possess, according to the merger agreement.

Putting aside B6's new offer, NK says it will make further progress toward completing the F9 deal, which is slated to conclude in the second half of 2022. The acquisition is subject to customary closing conditions, including the completion of the ongoing regulatory review process and NK stockholder approval.

Featured image: N903NK, Spirit Airlines Airbus A320NEO. Photo: Michael Rodeback/Airways