Saturday, July 2, 2022

JetBlue launches hostile takeover of Spirit after previous takeover was rejected

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JetBlue launched a hostile takeover of Spirit Airlines after its previous takeover offer was rejected. So said the New York-based airline a release that the $30 per share offer was “all-cash” and “fully funded.”

Earlier this month, Spirit’s board of directors rejected JetBlue’s offer of $33 a share to acquire the airline in favor of an existing merger agreement with Frontier, one of its ultra-low-cost competitors. The board cited antitrust issues and “an unacceptable level of closure risk” for its shareholders as reasons for rejecting the JetBlue offer.

But JetBlue still plans to acquire Spirit whether it wants to go through with the deal or not. The airline has said absorbing Spirit would allow it to better compete with the “Big Four” carriers by increasing the size of its fleet and roster of trained pilots.

“JetBlue offers greater value — a significant cash premium — greater security and greater benefits for all stakeholders,” JetBlue CEO Robin Hayes said in a statement. “Frontier offers less value, more risk, no divestiture obligations and no reverse break-up fee, despite more overlap on non-stop routes and their own regulatory challenges.”

JetBlue is urging Spirit shareholders to vote against the Frontier deal. The company also said it remains open to a “consensual transaction for $33” but will continue with its hostile takeover in the meantime. Both combinations would create the fifth largest airline in the US.

Spirit’s reference to antitrust issues relates to JetBlue’s involvement with American Airlines since 2000 under the umbrella of the North American Alliance (NEA), an initiative to combine services in New York City and Boston. The NEA wants to make it easier for passengers to board connecting flights from both airlines and should bring more routes to both cities.

While both companies claim the NEA increases competition, the Justice Department says filed an antitrust complaint against the alliance last September 2021, stating that it will “not only eliminate significant competition in these cities, but also hurt air travelers across the country by significantly reducing JetBlue’s incentive to compete with America elsewhere, reducing an already highly concentrated industry is further consolidated.”

JetBlue calls Spirit’s antitrust issues “a smokescreen to distract from the fact that the Frontier merger faces similar regulatory risks but lacks shareholder protection.”

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