In an Our Today follow-up on JetBlue Airways’ attempt at a hostile takeover of its competitor, Spirit Airlines, we can report that the board of Spirit is urging its shareholders to reject JetBlue’s offer.
Making a case for the shareholders to reject JetBlue, the board of Spirit is citing regulatory hurdles while accusing the rival airline of trying to derail its planned merger with fellow discount carrier, Frontier Airlines.
JetBlue launched its hostile takeover bid on Monday (May 16) after Spirit earlier this month rebuffed its surprise US$33-a-share, all-cash acquisition offer.
The tender offer from New York-based JetBlue was for US$30 a share. However, JetBlue is prompting Spirit shareholders to turn down the combination with Frontier at a June 10 Spirit stockholders meeting.
Sprit board fighting hostile take-over bid
Spirit’s board reviewed that offer and said in a statement on May 20 that it determined it “is NOT in the best interests of Spirit and its stockholders.” According to Spirit, “JetBlue’s proposals and offer are a cynical attempt to disrupt Spirit’s merger with Frontier, which JetBlue views as a competitive threat.”
Frontier and Spirit in February announced a US$2.9 billion cash-and-stock deal to combine into a discount airline behemoth. All three airlines fly Airbus narrow-body planes, with dozens more on order.
Either combination of the airlines would create the fifth-largest U. carrier. JetBlue reported yesterday that it is “no surprise that Spirit shareholders are getting more of the same from the Spirit Board,” accusing it of conflicts of interest.
JetBlue said Spirit’s board “continues to ignore the best interests of its shareholders by distorting the facts to distract from their flawed process and protect their inferior deal with Frontier.”
In Spirit’s statement, it reported on talks with JetBlue saying there “was a 100% certainty” that the Justice Department would seek to block JetBlue’s acquisition of Spirit. “This deal is illusory,” Spirit’s CEO, Ted Christie, said in an interview yesterday on CNBC’s Squawk Box, regarding the JetBlue bid to acquire Spirit.
“It will not happen in our opinion and for that reason, our board has rejected it and to imply otherwise again, we think is insulting,” Christie said. JetBlue said in a statement that both deals “have a similar risk profile.”
JetBlue previously offered to offload Spirit assets in Boston, New York and Florida, and pay a US$200 million reverse breakup fee if regulators don’t approve the deal. JetBlue argues its US$3.6 billion all-cash offer would “turbocharge” its growth.
However, Spirit’s board has cited JetBlue’s partnership with American Airlines in the Northeast US as a regulatory hurdle. The Justice Department sued JetBlue and American over that agreement last year with a trial date set for September.
Spirit shares fell more than one per cent yesterday, while JetBlue’s stock rose more than three per cent and Frontier rose less than one per cent.