With only two days to go until the Spirit shareholders’ vote, JetBlue has raised the stakes
Frontier Steps up to the Plate
JetBlue Airways has increased its bid for Spirit Airlines once more as it hopes to win the approval of the firm’s shareholders. The meeting that will decide that fate of the airlines is due to take place this Thursday.
The move comes after Frontier sweetened their offer for Spirit on Friday. The low-cost carrier bumped up its reverse-termination fee to $350 million to match JetBlue’s previous bid. Under the new deal, Frontier will now pay $4.13 per share, up two dollars from their last offer, as well as giving Spirit 1.9126 in Frontier Shares as part of the cash-and-stock deal.
JetBlue’s Newest Proposal
JetBlue’s latest offer brings their reverse break-up fee to $400 million. The reverse break-up fee is the money shareholders will receive if the deal fails to be consummated. It is an important consideration for Spirit shareholders, as JetBlue faces significant legal challenges that might prevent a merger. The Department of Justice is currently suing the airline due to antitrust concerns over its “Northeast Alliance” with American Airlines. Similar monopoly issues would likely impede a JetBlue-Spirit merger.
But that’s not the only way in which JetBlue are directly appealing to shareholders. The new deal includes a “ticking fee” that will pay shareholders 10 cents per share each month, from January 2023 until the deal’s completion. This, in addition to the $2.50 per share dividend they are offering, up from $1.50.
The Future of Spirit
The shareholders’ meeting that will decide Spirit’s future will be taking place this Thursday, after being moved from its original 10 June date earlier this month. In it, stakeholders will be asked to vote FOR or AGAINST the Frontier merger. On paper, JetBlue’s offer is vastly superior. The firm is offering $33.50 a share in cash, compared to Frontier’s cash-and-stock offer, which was worth $24.29 a share at its closing price last Friday.
Nevertheless, Frontier are optimistic. In an open letter to shareholders released this week, the airline argued that its offer could be worth over $50 a share, basing its predictions of an earlier Spirit press release. Whether that price is realised or not, Frontier still have the advantage of running a similar business model to Spirit, making them a more natural partner.
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