Spirit Rejects JetBlue Acquisition Overtures

 - May 2, 2022, 1:14 PM
A Spirit Airlines Airbus A321 takes off from Houston Intercontinental Airport in April 2017. (Photo: Flickr: Creative Commons (BY) by Colin Brown Photography)

Spirit Airlines has rejected JetBlue’s acquisition offer, Spirit said Monday, adding that the proposed transaction represents “an unacceptable level of closing risk” to its stockholders. The ultra-low-cost carrier asserted that the takeover offer does not constitute a superior proposal to the one issued by Frontier Airlines ahead of the Spirit-Frontier February 7 merger agreement. On April 29 JetBlue revised its offer to increase its monetary value and a promise to divest Sprit assets that might present a conflict of interest with JetBlue’s Northeast Alliance agreement with American Airlines, but Spirit again rejected that proposal.

Spirit said it would continue to advance toward the completion of its merger with Frontier, which it expects to close in the second half of this year if it passes antitrust scrutiny. Under the terms of the merger agreement, Spirit equity holders would receive 1.9126 shares of Frontier plus $2.13 in cash for each existing Spirit share they own.

JetBlue’s original offer of $33 per share in cash, tendered on April 5, represented a premium of some 50 percent on Spirit’s stock price on April 4 and a higher monetary value than the cash and stock offer from Frontier. Nevertheless, that deal would have likely faced considerable antitrust scrutiny given JetBlue’s ongoing fight with the Department of Justice (DOJ), which filed suit against the company for last year’s agreement with American Airlines called the Northeast Alliance (NEA). According to the DOJ, the series of agreements would result in the consolidation of the two airlines in New York and Boston, eliminating what the department called important competition in those cities and decreasing JetBlue’s incentive to compete with American elsewhere.

JetBlue in December said the NEA allowed it to announce plans for nine all-new destinations and 32 new routes. By the end of the year, JetBlue and American had added 63 new routes to their schedules, including 19 international flights scheduled for launch this year and increased frequencies on more than 130 routes.

“We believe a combination of JetBlue and Spirit has a low probability of receiving antitrust clearance so long as JetBlue's Northeast Alliance (NEA) with American Airlines remains in existence,” Spirit Airlines chairman Mac Gardner and CEO Edward M. Christie wrote in a letter to JetBlue CEO Robin Hayes. “[The Department of Justice] clearly views the NEA as having a broader national effect and Spirit believes DOJ will not place great weight on your proposed remedy, especially because there are reasons to doubt the efficacy of similar divestitures as a remedy in past airline mergers.”