JetBlue launches hostile takeover bid for Spirit Airlines

Terminal A at LaGuardia International Airport for JetBlue and Spirit Airlines in New York.

Leslie Joseph | CNBC

Jet Blue Airways launched a hostile takeover bid for Spirit Airlines the Monday after rejected carrier JetBlue’s $33 per share cash offer earlier this month.

JetBlue said acquiring Spirit would give it access to a large fleet of Airbus aircraft, trained pilots and the ability to better compete with the “Big Four” of U.S. airlines that control most of the US market. Spirit rejected offer to stick with planned $2.9 billion cash and stock deal to merge with another discounter Border airlines. These two airlines claim that a merger would allow them to grow and compete more easily.

JetBlue on Monday offered Spirit shareholders $30 per share and encouraged them to vote against the Frontier deal at a June 10 shareholder meeting. The company also said its earlier offer of $33 per share was still on the table should Spirit decide to trade. Shares of Spirit closed Friday at $16.98.

“If Spirit shareholders vote against the transaction with Frontier and compel the Spirit Board to negotiate with us in good faith, we will work toward a consensual transaction at $33 per share, subject to receiving supporting information,” a said JetBlue.

Either combination for Spirit would create the nation’s fifth-largest carrier.

“We are also offering to buy their shares, now at a slightly lower price than our original offer because the Spirit Board did not follow a fair process or allow us to look ‘under the hood’ as they allowed Frontier to do so,” JetBlue CEO Robin Hayes said in a memo to employees Monday.

Spirit and Frontier operate a similar model of tighter seats, ultra-low fares and fees for everything else, while JetBlue operates as a more full-service airline with free Wi-Fi, high-back TVs and business class on multiple routes.

Bill Franke, President of Frontier and a long-time investor in a budget airline, was the president of Spirit. He left in 2013 and his investment firm Indigo Partners bought Frontier.

JetBlue’s Hayes suggested previously laid out Spirit and Frontier merger plans hurt Spirit shareholders.

“The Spirit Board’s outright rejection of our offer is a disturbing sign that they don’t have the best interests of their shareholders in mind. So what does the Spirit Board think?” Hayes said in his employee memo. “We believe there are many historical ties and personal relationships between Frontier’s majority shareholder and some of the Spirit Board members who agreed to the Frontier deal.”

Spirit’s rejection of JetBlue’s $3.6 billion cash offer it made last month has put the New York-based airline at a disadvantage. crossroads. Hayes said an acquisition of Spirit would “accelerate” its growth at a time when demand for new narrow-body aircraft is high and pilots are in shortage.

Earlier this month, Spirit said it turned down JetBlue’s offer because it didn’t believe the deal would be approved by regulators. He said part of that rationale was JetBlue’s partnership in the northeast with American airlines, which the Justice Department sued to block last year. The Spirit CEO said earlier in an earnings call earlier this month said he had “questioned whether blocking our deal with Frontier was in fact their goal.”

Spirit further declined additional terms from JetBlue that could have assuaged regulatory concerns, including an offer to divest some of Spirit’s assets in Florida, New York and Boston. JetBlue also offered to pay a $200 million reverse break fee if the deal is not approved by regulators for antitrust reasons.

Transportation Secretary Pete Buttigieg declined to comment on the deal Monday and said the DOT would help support any analysis of a deal by the Justice Department.

“The most important thing is to make sure the American people are well served by a healthy airline industry, and part of a healthy airline industry, part of any healthy industry in our economy, is healthy competition,” he said in an interview with CNBC’s “Scream Box.”

Shares of Spirit were up nearly 10% in morning trading on Monday, while those of JetBlue were down about 3%. Frontier shares were up around 4% in early trading. Representatives for Spirit and Frontier did not immediately comment.

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