JetBlue (Nasdaq: JBLU) is not going down without a fight in its tumultuous bid to acquire Spirit Airlines, Inc. (NYSE: SAVE). The New York-based airline increased the reverse termination fee part of its buyout offer to US$350 million.
The move, announced today, comes after Frontier Airlines, Inc. (Nasdaq: ULCC) amended the merger agreement with Spirit to include a US$250 million reverse termination fee ahead of the latter’s shareholder vote.
Spirit has a standing definitive merger agreement with Frontier at roughly US$25 per share in a cash and stock deal. But JetBlue made an unsolicited all-cash offer to buy 100% equity of Spirit at US$30 per share. The latter rejected the offer, prompting JetBlue to launch a hostile takeover attempt.
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The increased breakup fee, from the original US$200 million, effectively sweetens the offer upwards of US$31.50 per share–US$30 in cash and US$1.50 prepaid prior to the closing of the transaction.
In the acquisition race between JetBlue and Frontier, the reverse termination fee has been contentious. Proxy advisory firm Institutional Shareholder Services advised Spirit shareholders to vote against the merger with Frontier, citing the lack of a reverse termination fee as a potential red flag.
“The [Spirit] board’s view that a Frontier merger has a safer path to regulatory approval is not supported by any guarantee of value for shareholders in the event of regulatory rejection,” the advisory firm said.
JetBlue itself blasted the Frontier’s last-minute inclusion of the reverse termination fee to its offer.
“Spirit’s Board only went back to Frontier under pressure, when it became increasingly clear their shareholders would decisively reject the Spirit Board’s flawed process and Frontier’s inferior transaction,” JetBlue said in its statement.
Spirit shareholders are set to vote on the proposed Frontier merger on June 10.
JetBlue last traded at US$10.47 on the Nasdaq.
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