JetBlue lifts offer for Spirit Airlines and agrees to sell assets

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Jet Blue Airways Corp.

JBLU 5.30%

continues its quest to buy Spirit Airlines Inc.,

TO REGISTER 2.11%

increasing its offer and strengthening its commitment to divest assets to obtain regulatory approval for the transaction.

JetBlue JBLU 5.30%

Monday raised its offer to $33.50 in cash per Spirit share. Previously, it had offered $31.50 per share.

Spirit debates whether to move forward with planned acquisition by Frontier Group Holdings Inc.

ULCC 5.78%

or accept JetBlue’s offer. The budget airline was supposed to hold a shareholder vote on the Frontier ULCC 5.78%

agreement earlier this month, but postponed it to negotiate with her two suitors.

JetBlue’s decision is the latest development in what has become a public negotiation. JetBlue and Frontier consider Spirit important to their ability to grow and compete with the larger airlines that dominate the industry. Either deal would create America’s fifth-largest airline.

With Frontier and JetBlue both locked in a battle for Spirit Airlines, the WSJ’s George Downs explains why the low-cost carrier is coveted by every airline and what a deal could mean for your travel plans. Illustration: George Downs

JetBlue began its series of offers for Spirit with one worth $33 per share when it launched about two months after Spirit and Frontier announced plans to merge in February. He then launched a takeover bid for Spirit shares at $30 per share after Spirit rejected JetBlue’s initial bet.

Last week, Spirit said it would give JetBlue and Frontier access to the same due diligence information, addressing a concern raised by JetBlue. Spirit’s board said it expects to complete discussions with the two carriers before the shareholders’ meeting scheduled for June 30.

Robin Hayes, chief executive of JetBlue, said the carrier had become more confident in the deal after completing its due diligence review and having discussions with Spirit management. He said JetBlue’s revised offer was subject to the request of Spirit’s board.

“The dialogue and information provided has reinforced our belief,” Hayes wrote to Spirit’s board on Monday, outlining the terms of the new $3.64 billion offer. Frontier’s stock and cash offering was valued at $2.9 billion when it was announced, but that had come down with Frontier’s stock price.

Mr Hayes said he still wanted to reach a ‘friendly, negotiated settlement’ but would continue the campaign to persuade shareholders to vote against the Frontier deal if Spirit disagreed with the fact. that JetBlue presented the superior offer.

JetBlue had previously said it would be willing to shed its assets to persuade regulators to sign the deal. He said on Monday that his latest offer “significantly increases” the divestments he would be willing to commit to in order to gain regulatory approval.

Spirit said Monday it had received the revised proposal and would evaluate it.

Frontier did not immediately respond to a request for comment. William Franke, chairman of Frontier, told the Wall Street Journal earlier this month that Frontier had made a fair offer and had no immediate plans to raise it.

Spirit had repeatedly rejected JetBlue’s advances, saying that although its offer was greater than the value of the mostly stock Frontier offer, it believed the JetBlue merger had little chance of being approved by regulators.

JetBlue persisted in trying to persuade Spirit investors to pull out of the Frontier merger and won support from Institutional Shareholder Services Inc., an influential proxy advisory firm that spoke out against the Frontier merger. ISS found that while the JetBlue deal faces greater potential challenges, JetBlue’s offer also offers more compensation if regulators block it.

Frontier added a $250 million reverse break fee to its offer, but JetBlue quickly retaliated with a $350 million break fee and a commitment to pay part of it up front as a special dividend. JetBlue’s latest offer of $33.50 per share includes the same provision to pay a portion of the break fee, $1.50 per share, upon closing of the transaction.

Write to Alison Sider at [email protected]

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