America’s low-cost carrier market is showing a particular dynamic since 2022 started: following Frontier $6.6 billion proposal to acquire Spirit Airlines, JetBlue is moving ahead with an offer totaling an adjusted enterprise value of $7.3 billion for the same company.
JetBlue just confirmed it has submitted a proposal to the Board of Directors of Spirit to acquire the company for $33 for a fully diluted equity value of $3.6 billion. The proposal represents a premium of 52% to Spirit’s undisturbed share price on February 4, 2022 (the closing price prior to Frontier bid), and a premium of 50% to Spirit’s closing share price on April 4, 2022.
In its statement, JetBlue says it “firmly believes” its bid constitutes a “superior proposal” under Spirit’s merger agreement with Frontier and that said bid “represents the most attractive opportunity for Spirit’s shareholders.”
“Customers shouldn’t have to choose between a low fare and a great experience, and JetBlue has shown it’s possible to have both,” said Robin Hayes, JetBlue CEO. “When we grow and introduce our unique value proposition onto new routes, legacy carriers lower their fares and customers win with more choice. The combination of JetBlue and Spirit – coupled with the incredible benefits of our Northeast Alliance with American Airlines – would be a game changer in our ability to deliver superior value on a national scale to customers, crewmembers, communities, and shareholders. The transaction would accelerate our strategic growth and create sustained, long-term value for the stakeholders in both companies.”
The combination with Spirit would complement the Northeast Alliance (JetBlue-American joint venture) positive impact by similarly expanding JetBlue’s presence nationwide.
“Our Northeast Alliance with American Airlines has supercharged our growth in New York and Boston, unlocking opportunities for us to grow where we could not have before. We view a combination with Spirit as perfectly complementing the NEA,” Hayes said.
The proposed transaction would dramatically improve JetBlue’s network strategy, diversifying and expanding JetBlue’s footprint across the U.S., Caribbean, and Latin America.
The combination would leverage JetBlue and Spirit’s complementary Airbus fleet and order book to drive sustained, profitable growth. The combined airline would have a fleet of 455 aircraft with 312 Airbus aircraft on order.
The proposed transaction is expected to deliver $600-700 million in net annual synergies once integration is complete, driven in large part by expanded customer offerings resulting from the greater scale of the network.
The combined airline is projected to have annual revenues of approximately $11.9 billion based on 2019 revenues. JetBlue expects the transaction to be accretive to earnings per share in the first full year, excluding integration costs.
Given its conviction in securing the necessary regulatory approvals, JetBlue is highly confident that its proposed transaction would be completed on a timely basis and on a timeframe consistent with the pending transaction with Frontier.
JetBlue’s proposal contemplates that the definitive agreement for the proposed transaction would contain contractual commitments designed to address any regulatory concern, including, while JetBlue is highly confident in the completion of the transaction, a “reverse break-up fee” that would become payable to Spirit in the unlikely event the proposed transaction is not consummated for antitrust reasons. These terms, the company states, “represent a meaningful improvement compared to the terms contemplated in the pending transaction with Frontier.”
Spirit has released a statement in which confirms JetBlue’s offer and says that “consistent with its fiduciary duties, the Spirit Board of Directors will work with its financial and legal advisors to evaluate JetBlue’s proposal and pursue the course of action it determines to be in the best interests of Spirit and its stockholders. The Board will conduct this evaluation in accordance with the terms of the Company’s merger agreement with Frontier and respond in due course.”
