Spirit Airlines enters discussions with JetBlue over proposed takeover
Spirit Airlines yesterday shared that it will enter talks with JetBlue regarding a bid to combine the two US carriers. In response, JetBlue shared that it welcomes the news amid a “superior proposal” under the terms of the current merger terms that Spirit has with Frontier.
LCC transformations
The United States aviation scene has had its fair share of mergers over the years. Now, there is another twist in the low-cost field.
In February, it was announced that Spirit and Frontier planned to merge to create “America’s most competitive ultra-low fare airline.” The duo hoped to provide $1 billion worth of savings to future passengers with the move. However, just two months later, the merger is up in the air as JetBlue has now entered the mix. Altogether, Spirit is enticed by JetBlue’s proposed all-cash transaction for $33.00 per share.
The proposal implies a fully diluted equity value of $3.6 billion, and the offer is subject to negotiation. Nonetheless, JetBlue’s leadership remains hopeful of a deal.
Robin Hayes, chief executive officer, JetBlue, shared the following about the takeover in a company statement:
“We are pleased the Spirit Board recognizes the compelling value for all stakeholders that JetBlue has offered. We believe JetBlue is the best partner for Spirit, and we look forward to engaging with the Spirit Board to finalize our combination, to create a national low-fare challenger to the four large dominant U.S. carriers that will result in lower fares and better service for customers. As a combined company, we expect we will be able to deliver superior value on a national scale to customers, crewmembers, communities, and shareholders.”
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The other option
Spirit notes it is still bound by the terms of the merger agreement with Frontier. The carrier has also not concluded that JetBlue’s proposal is the right path to go down. Therefore, Spirit’s board will be busy weighing out the pros and cons of the proposals from its two counterparts in the coming weeks.
Under the Frontier merger agreement, Frontier’s equity holders would hold approximately 51.5% of the new venture. Meanwhile, Spirit’s equity holders would have around 48.5%. The 12-member board would have seven representatives from Frontier and five from Spirit.
Based in Denver, Colorado, Frontier falls under the umbrella of Indigo Partners. Photo: Vincenzo Pace | Simple Flying
Plenty to consider
Either transaction would undoubtedly shake up the low-cost industry in the United States. All three airlines have a stronghold across the country, meaning that passengers will also be keeping a close eye on progress.
Authorities will also be watching closely. The Spirit-Frontier proposal already received attention from Colorado’s Attorney General Phil Weiser, who shared that he wants the Department of Transport (DOT) to investigate the move.
The JetBlue deal would also attract similar attention and receive close antitrust scrutiny from the government. All in all, officials will be keen to ensure that competition in the market remains open.
