Spirit Airlines’ board of directors urged shareholders Thursday to reject a direct appeal from JetBlue Airways to buy all outstanding Spirit stock, calling JetBlue’s moves a “cynical attempt to disrupt” a previously announced merger between Spirit and Frontier Airlines.
Spirit said in a statement that its board had unanimously agreed that taking up JetBlue on its bid, a move known as a tender offer, was not in the best interest of the company or its shareholders. JetBlue issued the tender offer Monday after Spirit rejected a formal acquisition bid in favor of merging with Frontier.
A sale to JetBlue faces substantial regulatory hurdles and is “not reasonably capable” of being completed, Spirit’s board concluded, according to the statement. The board said that a deal was especially unlikely to go through as long as an alliance between JetBlue and American Airlines at airports in the Northeast remained in effect. The Justice Department last year sued to prevent that partnership, citing concerns that it would prevent competition.
Even if JetBlue were to abandon that alliance, an option it has rejected, Spirit said it still had concerns about obtaining regulatory approval. JetBlue, for example, has said that it would remove seats from Spirit’s planes to match its own roomier configuration, which could result in higher rather than lower fares, Spirit’s CEO, Ted Christie, said in an interview Thursday.
“We view that as an extremely negative regulatory story,” he said. “The strategy itself is troubling.”
To address regulatory concerns, JetBlue said it would divest assets from some airports and offered to pay Spirit a $200 million breakup fee if a deal fell through. Frontier has not offered similar concessions. But Spirit on Thursday said JetBlue’s proposal was still unlikely to address the administration’s concerns and described JetBlue’s approach to managing regulatory risk as “cavalier.”
Spirit scheduled a June 10 shareholder vote on the proposed merger with Frontier, which the companies jointly announced in February, before JetBlue countered with its own bid. JetBlue had initially offered $33 per Spirit share and lowered that to $30 in its Monday tender offer. Either bid was more valuable than Frontier’s cash-and-stock offer, which has declined in value since the merger announcement, as Frontier’s share price dropped.
Even if shareholders reject the Frontier merger next month, Christie said Spirit would be unlikely to entertain JetBlue’s current offer.
“They provided us with a proposal early on, in the later part of March, and we spent a month and change reviewing it and reached the conclusion that it was not likely to be consummated,” he said. “If nothing changes, that has been asked and answered.”
A merger between Spirit and Frontier is widely viewed by airline analysts as a more natural fit because both airlines operate on a similar low-cost model, but with different geographical strengths. But it would still face scrutiny from regulators who have taken an aggressive stance toward antitrust concerns under the Biden administration. Spirit said that the Justice Department last month sent it and Frontier “second requests” for information about the merger, a process that pauses the deal while the companies answer the agency’s long list of questions.
JetBlue has argued that Frontier’s deal carries high regulatory risk.
“Spirit would have you ignore the current regulatory climate to think that approval of their Frontier deal is assured,” JetBlue said in a statement Thursday. “That is simply not true. Both deals are subject to regulatory review, and both deals have a similar risk profile.”
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