The bidding war for acquiring Spirit Airlines (NYSE: SAVE) is seemingly headed for its grand finale. Just a day after the airline terminated its long-standing and defended agreement with Frontier Airlines, Inc. (Nasdaq: ULCC), the firm now reached a deal to merge with JetBlue (Nasdaq: JBLU).
JetBlue has since been upping its hostile takeover bid and touting it as the “superior proposal” over Frontier’s to Spirit shareholders.
Spirit and JetBlue announced that they’ve shook hands at a US$3.8 billion merger agreement. The latter is prepared to make the latest all-cash offer of US$33.50 per Spirit share, including a prepayment of US$2.50 per share after securing shareholders’ approval and a US$0.10 per share ticking fee paid monthly pending the closing of proposed merger.
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This compares to Frontier’s standing offer of US$4.13 cash and 1.9126 Frontier share combination per Spirit share, including US$2.22 per share in prepayment. At the time the deal was inked earlier this year, the total valuation of the agreement stood at US$2.9 billion.
The Spirit-JetBlue agreement comes immediately on the heels of terminating the Frontier agreement. At the time, the airlines said that “the Spirit Board of Directors will continue [its] ongoing discussions with JetBlue.”
“While we are disappointed that we had to terminate our proposed merger with Frontier, we are proud of the dedicated work of our Team Members on the transaction over the past many months,” said Spirit CEO Ted Christie.
Following the termination, Frontier shares soared 20.5% on the Nasdaq.
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“Rather than overpay for Spirit, the board prioritized the interest of Frontier, our employees and our shareholders,” Frontier CEO Barry Biffle said on an earnings call.
While JetBlue’s campaign to win the merger takeover with the shareholder vote, the airline’s “superior proposal” has gained mileage among investors and analysts–so much so that the supposed shareholder vote to decide on the Spirit-Frontier merger has been postponed multiple times.
The new Spirit-JetBlue merger proposal is expected to close in H1 2024, touted to take the the fifth slot among America’s largest airlines.
“We have two priorities: one is to get this deal closed and get the airline integrated and build a bigger JetBlue,” JetBlue CEO Robin Hayes said in an interview. “Secondly to run a reliable operation in the meantime.”
On the other hand, with Spirit leaving the low-cost airline competition, Frontier is set to be left as the market leader in that space.
“Should a JetBlue-Spirit merger occur, we believe Frontier will largely inherit the keys to the low-cost kingdom in the U.S.,” wrote JP Morgan analyst Jamie Baker.
Spirit agreed to pay US$25 million after terminating the merger agreement with Frontier.
Spirit last traded at US$25.01 on the NYSE, up 5.6% on the day, while JetBlue last traded at US$8.26 on the Nasdaq.
Information for this briefing was found via Wall Street Journal, CNBC, Edgar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
