Tuesday, July 5

Bidding war for Spirit Airlines heats up as JetBlue sweetens offer


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CHICAGO/WASHINGTON/NEW YORK — JetBlue Airways Corp on Monday improved its offer for Spirit Airlines Inc, heating up the bidding war for the ultra-low-cost-carrier whose shareholders are due to vote later this week on a merger agreement with Frontier Group Holdings Inc.

JetBlue increased its reverse break-up fee by $150 million to $350 million, which is payable to Spirit shareholders in case the deal falls through due to antitrust reasons.

The revised offer comes days after Frontier agreed to pay Spirit a break-up fee of $250 million.

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Under JetBlue’s revised terms, Spirit shareholders would receive $31.50 per share in cash, comprising $30 at deal close and prepayment of $1.50 from a raised reverse break-up fee soon after Spirit shareholders vote to approve a deal.

Spirit’s shares were up 6.1% in mid-day trade.

Its shareholders are scheduled to vote on Friday on the company’s merger agreement with Frontier. However, Spirit said its board will evaluate JetBlue’s new offer and respond in due course. It asked the company’s shareholders not to take any action at this stage.

The race between JetBlue and Frontier for the Florida-based airline underscores the challenge US carriers face in expanding their domestic footprint amid persistent labor and aircraft shortages. Either of the two deals will create the fifth-largest US airline.

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Spirit rejected JetBlue’s offer last month saying it had a low likelihood of winning approval from government regulators, prompting the New York-based carrier to launch a hostile takeover bid.

Savanthi Syth, airline analyst at Raymond James, said the revised offer is likely to “appease” those Spirit shareholders who have antitrust concerns about a deal with JetBlue.

In the latest offer, JetBlue did not offer to unwind its “Northeast Alliance” (NEA) partnership with American Airlines – a key sticking point in its deal talks with Spirit, which has been reluctant to consider any offer from JetBlue due to antitrust concerns.

The NEA is already in the crosshairs of the Justice Department, which sued JetBlue in September to unwind the partnership.

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JetBlue Chief Executive Robin Hayes told CNBC that the airline had made “unprecedented divestiture commitments” to win regulatory approval. “We need the Spirit board to seriously consider our offer,” he said.

Industry sources said Spirit is still committed to the deal with Frontier, but the company may be forced to switch sides if it faces mounting pressure from large institutional shareholders.

Last week, proxy advisory firm Glass Lewis recommended Spirit investors to back the Frontier deal, while another proxy firm, Institutional Shareholder Services Inc, advised against it.

The new JetBlue offer will trigger ISS and Glass Lewis opinion revisions on the Frontier deal, the sources added.

On Monday, JetBlue also reached out to Spirit workers, promising them better pay and benefits, more jobs, career development and no furloughs.

Spirit’s agreement with Frontier has also pledged to avoid any job losses and add 10,000 direct jobs by 2026. (Reporting by Rajesh Kumar Singh in Chicago, David Shepardson in Washington and Anirban Sen in New York Aishwarya Nair in Bengaluru; Editing by Devika Syamnath and Nick Zieminski)

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