Battle for the Budget Skies: JetBlue Launches Hostile Takeover Bid for Spirit Airlines
This Time It’s Hostile
Earlier this month, Spirit Airlines (SAVE) rejected a $33 per share all-cash offer from JetBlue Airways (JBLU). The move would have transformed JetBlue into the nation’s fifth-largest carrier, .
Now JetBlue is taking a different approach toward trying to get a deal done. Yesterday the company offered Spirit shareholders $30 per share, after the stock price closed at $16.98 last Friday. JetBlue also encouraged Spirit’s shareholders to reject a similar merger agreement with Frontier Airlines (ULCC), suggesting its deal could eventually match that initial $33 per share offer.
Tracking the Negotiations
When Spirit turned down JetBlue’s original offer, it noted the deal was unlikely to receive regulatory approval. This is at least partially based on JetBlue’s existing partnership with American Airlines, which led to a Department of Justice antitrust lawsuit. Spirit’s CEO also openly mused about whether or not JetBlue’s main motivation was to block the agreed-upon deal with Frontier.
This latest attempt from JetBlue is considered a hostile takeover because of Spirit’s clear rejection of the previous offer and the way shareholders are directly involved. In a hostile bid, the acquiring firm will make an appeal to the target’s shareholders, or call on them to force a new management team into place.
In order to try to get a deal done, JetBlue offered to divest some of Spirit’s assets in certain markets. It also offered a $200 million reverse-breakup fee, if regulators blocked it outright.
Industry analysts say JetBlue is in essence competing with Frontier to buy Spirit, as whichever carrier completes the deal will become the fifth-largest airline in the US market. For the time being, Spirit’s $2.9 billion-cash-and-stock deal is the agreed-upon transaction, all while JetBlue wages this latest bid. Regulators and investors are closely watching, as Frontier’s business model is similar to Spirit’s, and JetBlue has argued the deal could supercharge its growth.
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