JetBlue is Going Hostile

JetBlue Airways announced plans to launch a hostile takeover attempt for Spirit Airlines after its $3.6 billion cash bid was rejected two weeks ago by Spirit’s board in favor of a deal with rival Frontier.

✈️ A deeper dive... In a letter to Spirit shareholders yesterday, JetBlue urged them to vote against the Frontier deal, which they pointed out carries a substantially lower price tag.

• JetBlue is now offering $30 per share, less than the initial offer of $33 per share, though the airline says it’ll return to the original price pending due diligence.
• Frontier’s cash-and-stock deal has lost value in recent weeks and currently sits at ~$19 per share. But according to Spirit’s board, a smaller merger with Frontier is preferable since it’s more likely to be approved by US regulators.

✋ Yes, but… JetBlue disagrees, arguing that the potential partnership isn’t a regulatory hurdle. And even if it is, the airline has committed to paying a $200 million breakup fee if the deal falls through for antitrust reasons, while Frontier hasn’t added any such clause.

• JetBlue claims Spirit’s board rejected its initial offer due to their close ties with Frontier Chairman William Benke, who once served in the same role at Spirit.

📈📉 The market reacts: In the hour after the takeover attempt was publicized, Spirit shares climbed 8.4%, JetBlue fell 2.5%, and Frontier rose 4.0%.