JetBlue Announces New Spirit Offer After Advisory Firm Sides With Frontier

Following shareholder feedback, JetBlue has further modified its offer to purchase Spirit airlines and believes its offer is superior to that of Frontier Airlines, which is also interested in purchasing Spirit.

JetBlue is encouraging shareholders to vote against what it calls is an “inferior” offer from Frontier.

“After the Spirit Board’s failure to recognize our decisively superior offer, we’ve discussed our offer directly with Spirit shareholders and are now modifying our proposal in response to shareholders’ expressed interest, to include a monthly payment for shareholders, with the certainty of a significant cash premium at closing,” said Robin Hayes, chief executive officer, JetBlue. “Spirit shareholders should not be misled by Spirit and Frontier’s rosy projections of a potential future stock price, which are based on highly flawed assumptions that fail to account for the actual market conditions, including the need for pilot pay increases and elevated fuel costs. The entrenched Spirit Board has approved a revised deal that is ultimately better for Frontier and its controlling shareholder than it is for Spirit shareholders.”

The new, sweetened offer includes the following, according to a release from JetBlue:

—Increased accelerated prepayment to $2.50 per share, structured as a cash dividend to Spirit shareholders promptly following the Spirit shareholder vote approving the combination between Spirit and JetBlue (subject to CARES Act limitations).

—Enhanced reverse break-up feeof $400 million payable to Spirit in the unlikely event the transaction is not consummated for antitrust reasons.

—Addition of a ticking fee mechanism, which would provide shareholders with a monthly prepayment of $0.10 per share between January 2023 and the consummation or termination of the transaction. This represents an estimated aggregate ticking fee of up to $1.80 per share, of which the first $1.15 per share in payments will offset the reverse break-up fee or the merger consideration. Any payments in excess of the $1.15 per share will be incremental to the total purchase price of $33.50 or the reverse break-up fee. This increases the total transaction consideration to up to $34.15 per share in the event the transaction is consummated and total downside protection to $4.30 per share, or approximately $470 million in the aggregate, in the event the transaction is terminated.

Earlier on June 27, 2022, after Frontier sweetened its offer to JetBlue, independent proxy advisory firm Institutional Shareholder Services (ISS) suddenly reversed its course and advised that Spirit should take the offer from Frontier.