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Spirit Airlines Calls For Shareholders To Reject JetBlue Bid

By Dave Simpson

Spirit Airlines SAVE.N urged shareholders to reject a hostile bid by JetBlue Airlines JBLU.O on Thursday 19 May, saying that it was "a cynical attempt to disrupt" its merger with Frontier ULCC.O.

Details

JetBlue says its $30 a share offer is superior to the value of Frontier's cash-and-stock deal and regulatory concerns are not a reason to reject its bid. Shareholders are set to vote on Frontier's offer, which currently values Spirit at about $20.33 per share.

Spirit questioned JetBlue's disclosure Monday 16 May that acquiring Spirit has been a "strategic" objective for many years, adding that antitrust issues would mean a deal could not be completed.

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JetBlue, which in early April offered $33 per share, argues a deal will help it better compete with the "Big Four" US airlines that control nearly 80% of the passenger market.

The sixth largest US passenger carrier, JetBlue would operate Spirit under the JetBlue brand, but promised a $200 million reverse break-up fee, or $1.80 per Spirit share, if the deal did not go through for antitrust reasons.

"During the extensive discussions held between Spirit and JetBlue, JetBlue itself admitted that a lawsuit from DOJ seeking to block the merger was a 100% certainty; therefore, JetBlue would have to prevail or settle (which would be contrary to DOJ's avowed enforcement approach) in order to consummate its proposed acquisition of Spirit," Spirit said in a statement.

JetBlue responded Thursday 19 May to Spirit saying that "both deals are subject to regulatory review, and both deals have a similar risk profile.... Frontier offers less value, more risk, and no regulatory commitments, despite a similar regulatory profile."

JetBlue reiterated its argument the "Spirit Board, driven by serious conflicts of interest, 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 a letter to Spirit shareholders on Monday 16 May, 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."

In early trading on Thursday 19 May Spirit shares were flat, while Frontier was up 1% and JetBlue was up 1.5%.

"JetBlue's focus on Spirit appears to be an attempt to distract from the fact that JetBlue's own business is in disarray," Spirit said on Thursday, adding that its rival's stock price had fallen about 34% since 29 March.

"JetBlue stockholders obviously agree that their company's quixotic offer for Spirit is a dead end, posing substantial risks to their own business," Spirit added.

TIMELINE-Spirit Airlines, JetBlue Lock Horns Over Takeover

The above news was followed by news that the battle to snap up Spirit Airlines <SAVE.N> is heating up. In the latest twist, Spirit urged its shareholders to rebuff a hostile takeover offer from its larger rival JetBlue Airlines Corp <JBLU.O>.

JetBlue, which is locked in a takeover battle for Spirit with Frontier Group Holdings Inc <ULCC.O>, has argued that a deal would help the companies better compete with the "Big Four" U.S. airlines that control nearly 80% of the passenger market in the country.

Below are the key events in the takeover saga:

Date Development
May 19 Spirit Airlines urges shareholders to reject the hostile offer from JetBlue, saying it was "a cynical attempt to disrupt" its merger with Frontier
May 16 JetBlue makes hostile all-cash takeover offer of $30/share and adds it was ready to "negotiate in good faith a consensual transaction at $33"
May 11 Spirit says it will hold a shareholder meeting on June 10 for a vote on its proposed merger with Frontier
May 10 Head of Sun Country Airlines <SNCY.O> throws his backing behind potential merger in the ultra-low-cost airline sector
May 2 Spirit rejects JetBlue's $33/share offer, saying it had a low likelihood of winning regulatory approval
April 7 Spirit says that it would enter into discussions with JetBlue on its $3.6-billion offer as it could likely lead to a "superior proposal" to the one from Frontier
April 6 JetBlue mounts a vigorous defense of its unsolicited $3.6 billion bid for Spirit, adding that it is "highly confident" of securing regulatory approval
April 5 JetBlue makes an unsolicited $3.6 billion, or $33/share, all-cash bid for Spirit Airlines
March 10 Several public advocacy groups call on U.S. regulators to block Frontier's bid for Spirit
Feb. 8 Lawyers from the U.S. Justice Department say Spirit and Frontier's merger to create the fifth-largest airline in the country would face close scrutiny
Feb. 7 Frontier makes a cash-and-stock offer of $25.83/share for Spirit

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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