JetBlue Goes Hostile To Buy Spirit Airlines After Rejection

JetBlue Airways Corp is not taking no for an answer in its quest to buy rival Spirit Airlines.

On Monday, the New York-based carrier launched a hostile all-cash takeover bid for Spirit Airlines, two weeks after the ultra-low-cost carrier rejected an offer from the larger rival.

JetBlue, which in early April offered $33 per share, is locked in a takeover battle for Spirit with Frontier Group Holdings and has argued a deal will help better compete with the "Big Four" U.S. airlines that control nearly 80% of the passenger market.

In a letter to Spirit shareholders on Monday, JetBlue offered $30 per share and said it was ready to "negotiate in good faith a consensual transaction at $33, subject to receiving necessary diligence."

Spirit said its board will "carefully" review JetBlue's offer. The company plans to inform shareholders of the board's decision within 10 business days.

It urged shareholders to take no action on the JetBlue offer at this time.

The Florida-based airline rejected the earlier offer, saying it had a low likelihood of winning approval from regulators.

JetBlue, however, called that argument a "red herring". It said Spirit's deal with Frontier faces similar regulatory risk.

"Spirit's Board is prioritizing its own self-interest and personal relationships with Frontier over its shareholders' interests," JetBlue Chief Executive Robin Hayes said in his open letter to Spirit shareholders.

Hayes accused the Spirit Board of not acting in the best interests of its shareholders, citing "significant" ties of its multiple directors to Frontier's chairman and veteran budget airline investor Bill Franke.

Franke, who masterminded the Frontier-Spirit deal, previously served as chairman of Spirit.

"Ask yourself a simple question: why won't the Spirit Board engage with us constructively? The interests of Bill Franke's Indigo Partners and the long-standing relationships between the two companies is the obvious answer," Hayes said.

Frontier and Franke did not respond to Reuters requests for comment.

Spirit will hold a shareholder meeting on June 10 to vote on its proposed merger with Frontier.

JetBlue, the sixth-largest U.S. passenger carrier, also said it had filed a "Vote No" proxy statement urging Spirit shareholders to vote against the planned merger with Frontier. The value of Frontier's cash and stock for each share of the discount carrier on Monday was recently at $19.48 a share.

Shares of Spirit rose about 13% to $19.14 in afternoon trade. JetBlue shares were down 4.6% to $9.67%. Frontier shares were up 7% at $9.34.

A 'STRATEGIC' OBJECTIVE

JetBlue's bid seeks to combine two companies with very little in common other than fleets dominated by Airbus SE jets. A main concern of investors is the starkly different business models of the two carriers.

New York-based JetBlue, however, views the deal as a way to expand its domestic footprint amid persistent labor and aircraft shortages. It disclosed Monday that acquiring Spirit has been a "strategic" objective for many years.

Concerns about the deal's regulatory hurdles stem in part from a U.S. Department of Justice's lawsuit over JetBlue's partnership with American Airlines Group Inc in the New York and Boston areas. Spirit cited the alliance as one of its concerns while rejecting JetBlue's offer.

The partnership, announced in July 2020, allows the carriers to sell each other's flights and link frequent flyer programs in a move aimed at helping them better compete with United Airlines and Delta Air Lines in the Northeast.

The lawsuit will go to trial in September. But Hayes said the alliance is "irrelevant" to JetBlue's ability to complete the Spirit acquisition. The company plans to divest Spirit's holdings in New York and Boston to address any overlap.

JetBlue has promised a $200 million reverse break-up fee.