Spirit Airlines Inc. on Thursday (July 28) agreed to a US$3.8 billion buyout offer from low-cost rival JetBlue Airways Corp., ending a drawn-out battle for the carrier whose acquisition would help create the fifth-largest U.S. airline.
The victory for JetBlue comes after Spirit cancelled its US$2.7 billion sale to Frontier Group Holdings, but the potential combination is expected to kick off a fight with antitrust regulators.
JetBlue’s offer price of at least US$33.50 per share represents a premium of nearly 38 per cent to the last closing price of Spirit shares. Including a “ticking fee”, or small monthly payments to Spirit shareholders from January next year until the deal is completed, the offer can go up to $34.15 per share.
Spirit shares were up nearly five per cent before the bell as investors cheered the end of a takeover saga that began in April.
JetBlue rose one per cent, while Frontier was 1.6 per cent higher.
Both carriers were locked in a bidding war to create a combined airline that will better compete with legacy US carriers at a time when the industry faces a labour crunch and high jet fuel costs.
Spirit had in February agreed to a $2.9 billion offer from Frontier before JetBlue jumped into the fray in April. Despite JetBlue’s better terms, Spirit had pushed for a merger with Bill Franke-backed-Frontier, citing antitrust concerns with a potential JetBlue tie-up.
But it could not muster investor support for the deal and was forced to delay a shareholder vote on the proposed acquisition four times. At the latest meet that was set for Thursday, Spirit shareholders were expected to vote against a merger with Frontier, Reuters had reported.
Spirit cancelled the merger with Frontier without giving details on results of the shareholder meet.
The outcome is a setback for Franke, who was instrumental in starting the talks with Spirit last year. Franke’s airline-focused buyout firm, Indigo Partners, is a major shareholder in Frontier.