JetBlue Embarks on Hostile Takeover of Spirit Airlines

Four companies essentially rule the airline industry. American, Delta, United, and Southwest Airlines make up about 80% of traffic in the sky. While no current airline is in danger of cracking that list, three are battling to combine and create viable competition. With the low-budget airline Spirit on the market, JetBlue and Frontier battle out a merger. The former seems to resort to a hostile takeover. 

Spirit Rejects JetBlue Offer

On April 2, Spirit rejected a $33 a share cash offer from JetBlue. The company cited concerns that regulators wouldn’t clear a merger with JetBlue. Spirit said, “given this substantial completion risk, we believe JetBlue’s economic offer is illusory.”

Spirit said it would stick to a deal with Frontier earlier, valued at $25 a share. Unfortunately for both companies, stock prices for Frontier have since fallen. 

If Spirit and Frontier were to combine, the new airline would leapfrog JetBlue and Alaska Air in miles flown. According to 2021 statistics, this would be just behind the four major airlines. They feel like a match made in heaven due to their similar operations to low-cost airlines. While they offer cheaper fares than the others, they charge for everything else in an ala carte style. 

JetBlue Goes Around Spirit Board for Hostile Takeover

JetBlue appealed directly to Spirit’s shareholders, urging them to vote against the Frontier deal. They did this while launching its all-cash offer of $30 per share, a considerable mark-up. JetBlue said Monday that its offer represented a “60% premium to the value of the Frontier transaction.” 

In a letter to the shareholders, JetBlue added was willing to negotiate a $33-per-share deal. This deal requires Spirit to provide information about its business that JetBlue claims they withheld.

“The Spirit Board failed to provide us the necessary diligence information it had provided Frontier and then summarily rejected our proposal, which addressed its regulatory concerns, without asking us even a single question about it,” JetBlue said in the letter. “The Spirit Board based its rejection on unsupportable claims that are easily refuted.”