June 30, 2022

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Spirit Airlines will weigh JetBlue’s takeover offer against its planned merger with Frontier.

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Spirit Airlines said on Thursday that it would enter talks with JetBlue Airways about a bid to combine the two companies, a deal that threatens to spoil Spirit’s plans for a merger with Frontier Airlines.

In a statement, Spirit said it had consulted with outside financial and legal advisers and had determined that JetBlue’s offer could “reasonably” top the cash-and-stock deal to merge with Frontier that those two companies announced in February. JetBlue’s surprise bid announced this week exceeded Frontier’s initial offer.

“Spirit intends to engage in discussions with JetBlue with respect to JetBlue’s proposal, in accordance with the terms of the company’s merger agreement with Frontier,” Spirit said in a statement.

Spirit noted on Thursday that its board had not deemed JetBlue’s proposal to be better than the Frontier merger and said that the board’s prior recommendation that shareholders adopt that merger still stood.

JetBlue’s Tuesday offer, about $3.6 billion in cash, initially confounded some analysts who questioned JetBlue’s assumptions about the ease with which it could subsume Spirit. The value of Frontier’s offer has fluctuated with its stock price, but it was worth about a third less than the JetBlue bid using Monday’s share prices.

In a statement, Robin Hayes, JetBlue’s chief executive, said: “We are pleased the Spirit board recognizes the compelling value for all stakeholders that JetBlue has offered. We believe JetBlue is the best partner for Spirit, and we look forward to engaging with the Spirit board to finalize our combination, to create a national low-fare challenger to the four large dominant U.S. carriers that will result in lower fares and better service for customers.”

Both JetBlue and Frontier said a merger with Spirit would enable them to better compete against the nation’s four dominant airlines, which control about two-thirds of the domestic market.

The Frontier merger is widely seen among analysts as more straightforward, combining two budget carriers with strengths on opposite coasts. The JetBlue deal is not as clear-cut, though some analysts see merit in the airline’s buying Spirit to accelerate growth plans that would be difficult to carry out otherwise.

Niraj Chokshi and Lauren Hirsch

2022-04-08 04:00:06

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