Is JetBlue’s offer better than Frontier’s? Spirit Airlines to consider rival bid

Spirit Airlines (S64) (SAVE) said a cash takeover offer from JetBlue (JBLU) may potentially turn out better than an agreed deal with Frontier Airlines, but that it has not yet made a decision. 

The ultra-low-cost carrier said in a statement on April 7, 2022, that it therefore plans to talk to JetBlue (JBLU) about its surprise $3.6 billion takeover offer. 

Frontier and Spirit announced an agreed merger deal on February 7, to create an “aggressive ultra-low-fare competitor” in the US aviation market, which JetBlue (JBLU) then upended a month later with a fresh all-cash offer.  

“Spirit remains bound by the terms of the merger agreement with Frontier, and Spirit’s Board has not determined that JetBlue (JBLU)’s proposal in fact constitutes a Superior Proposal as defined in the merger agreement with Frontier,” Spirit cautioned in the statement.  

Spirit also noted that it has not changed its recommendation to shareholders, which is to accept the Frontier merger deal.  

Frontier and Spirit announced agreed merger plans on February 7, 2022, under which Spirit shareholders would receive 1.9126 Frontier shares plus $2.13 in cash, equivalent to valuing Spirit at $25.83 per share.   

JetBlue (JBLU) then came up with an unsolicited offer on April 5, 2022. It is offering an all-cash deal of $33 per Spirit share, which it says is a 37% premium to the value implied by the Frontier proposal.  

“Spirit intends to engage in discussions with JetBlue (JBLU) with respect to JetBlue (JBLU)’s proposal, in accordance with the terms of the Company’s merger agreement with Frontier,” Spirit said in its statement on April 7, 2022. It also confirmed that it was not certain that talks with JetBlue (JBLU) would lead to a deal.   

JetBlue (JBLU), which is not an ultra-low-cost carrier, says that if it acquires Spirit then it will be able to better compete with the big four US airlines and force them to bring down fares. 

Responding to JetBlue’s (JBLU) offer, Frontier said on April 5, 2022, that a Spirit-Frontier transaction would be better for consumers and shareholders.  

“A combined Spirit and Frontier will deliver $1 billion in annual savings for consumers and offer even more ultra-low fares to more places nationwide, creating America’s most competitive ultra-low fare airline,” Frontier said in an SEC filing. “Unlike the compelling Spirit -Frontier combination, an acquisition of Spirit by JetBlue (JBLU), a high-fare carrier, would lead to more expensive travel for consumers,” it countered.  

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