Spirit Airlines said on Monday it still backed Frontier Airlines’ $2.9 billion takeover bid for the airline, saying it was more likely to win regulatory approval than the bid. $3.6 billion competitor to JetBlue.
Spirit said antitrust regulators are unlikely to approve JetBlue’s bid due to JetBlue’s alliance with American Airlines in the North East, a deal the Justice Department is suing to block.
“We find it hard to understand how JetBlue can believe” that the Justice Department or a court would let JetBlue make a deal with American and then buy Spirit, eliminating the nation’s largest low-cost airline, the board said. directors of Spirit in a letter to the directors of JetBlue.
JetBlue rejected Spirit’s view, particularly after promising last week to make concessions intended to secure regulatory approval for its bid. JetBlue’s CEO appeared to raise the possibility of a hostile takeover bid.
Shares of Miramar, Fla.-based Spirit fell more than 9%. Shares of New York-based JetBlue gained nearly 3%, while shares of Denver-based Frontier fell 4%.
The development was a reversal from last month, when Spirit said that after speaking with financial and legal advisers, its directors believed JetBlue’s offer could “reasonably” prove to be the best of the best. the two chords.
Spirit said its board continues to unanimously support the offer made by Frontier in February and sees it as the best way to maximize value. The airline expects to reach an agreement with Frontier in the second half of the year.
The JetBlue-American cooperative venture in Boston and New York, called the Northeast Alliance or NEA, faced opposition from Spirit and other competitors long before Frontier’s February bid to buy Spirit.
JetBlue attempted to address regulatory concerns by offering to divest Spirit’s airport gates and take-off and landing slots in New York and Boston and possibly Fort Lauderdale, Florida. However, Spirit’s board said on Monday that the revised offer is unlikely to appease regulators because the revised offer “clearly indicates that JetBlue is not prepared to terminate” the partnership with American.
A Spirit-Frontier merger would combine the nation’s two largest low-cost airlines and create America’s No. 5 carrier. While Spirit and Frontier are similar “ultra low-cost” carriers, JetBlue operates on a business model that resembles more to the big four – American, Delta, United and Southwest. JetBlue would absorb Spirit and eliminate a budget airline that regulators say helps keep ticket prices lower.
JetBlue on Monday repeated the argument that its offer is better for Spirit shareholders: It would pay them $33 per share in cash compared to Frontier’s cash and stock offer worth $22.42. per share, and JetBlue’s offer was watered down to include a $200 million break. fees if the deal fails.
“We hope Spirit’s board will now recognize that ours is clearly a superior proposition and engage with us in a more constructive way than to date,” said JetBlue CEO Robin Hayes.
Hayes was far more blunt, even threatening, in a five-page letter last week to Spirit chairman Mac Gardner and CEO Ted Christie. Hayes wrote that promises to divest from his airline should reassure Spirit executives of JetBlue’s ability to win antitrust approval.
“While we would undoubtedly prefer to negotiate a transaction with you, if you continue to refuse to constructively engage with us so that we can deliver this value to your shareholders, we are actively considering all other options available to you. us,” Hayes wrote.
Frontier CEO Barry Biffle said last week that regulatory review of a Frontier-Spirit combination “is already well underway and several months ahead of any alternative”.
When an analyst asked Biffle why Frontier hadn’t campaigned more aggressively and publicly for its offer, he said, “We’ve been pretty clear” about how Frontier views the benefits of its offer. “I don’t think we should keep repeating it.