JetBlue Airways Corp (JetBlue) has substantially increased its offer for ultra-low-cost carrier Spirit Airlines (Spirit), ahead of this Friday’s shareholder vote with respect to Frontier Group Holdings’ (Frontier) offer for Spirit.
JetBlue is trying to woo Spirit’s current staff with the promise of better pay and benefit, additional jobs, no furloughs and improved career development, despite Frontier’s pledge to increase job numbers by 10,000 by 2026 and no job losses with their proposed merger. However, the main element of JetBlue’s revised offer is an increase in the reverse break-up fee in the event that any accepted offer by the Spirit board is subsequently vetoed by regulators for antitrust reasons.
Recently, Frontier increased its reverse break-up ‘sweetener’ to US$250 million, topping JetBlue’s US$200 million. However, JetBlue has now increased its reverse break-up fee offer by US$150 million to US$350 million. Under JetBlue’s revised terms, Spirit shareholders would receive US$31.50 per share in cash, comprising US$30 at the deal’s close and prepayment of US$1.50 from a raised reverse break-up fee soon after Spirit shareholders vote to approve a deal. Consequently, its offer is now worth US$3.4 billion.
The major sticking point that concerns Spirit is the existing problem being faced by JetBlue in relation to the Justice Department suing the carrier to unwind its partnership with American Airlines, known as the “Northeast Alliance partnership.” JetBlue Chief Executive Robin Hayes told CNBC the airline had made “unprecedented divestiture commitments” to win regulatory approval. “We need the Spirit board to seriously consider our offer,” he said.
While Spirit may currently remain committed to the deal with Frontier, industry sources have commented that it may have to look more seriously at JetBlue’s new offer if it comes under undue pressure from major institutional shareholders. (£1.00 = US$1.25 at time of publication).
