JetBlue Airways’ hostile takeover bid for Spirit Airlines took a bitter turn on Thursday as the board of directors of the South Florida-based discount carrier urged its shareholders to spurn the offer.
In a statement, the board accused Spirit’s New York-based rival of making “inaccurate statements and mischaracterizations” about Spirit’s reaction to its offer and asserted that Spirit shareholders would be unable to participate in any upside stock price action if they opted for JetBlue’s hostile offer, which is now capped at $30 a share.
The board noted that an earlier merger proposal submitted by Frontier Airlines of Denver offers better upside as Spirit investors would become 48% owners of a merged Frontier-Spirit operation. A shareholder vote on the Frontier deal is scheduled for June 10.
Sees no clear path to U.S. approval
But the chief board argument against the JetBlue offer focuses on a perceived inability to get a Spirit-JetBlue combination past federal regulators so long as the New York carrier remains in a joint marketing arrangement with American Airlines in the Northeast. The Justice Department has sued JetBlue and American over the arrangement, alleging it limits competitive choices for consumers.
“In its comprehensive analysis, the board determined that the JetBlue transaction faces substantial regulatory hurdles, especially while the Northeast Alliance with American Airlines remains in effect, and is, as a result, not reasonably capable of being consummated and is not superior to Spirit’s agreed merger transaction with Frontier,” the Spirit board said in its statement.
“JetBlue’s tender offer has not addressed the core issue of the significant completion risk and insufficient protections for Spirit stockholders,” said Mac Gardner, the board chairman. “Based on our own research and the advice of antitrust and economic experts, our view is that the proposed combination of JetBlue and Spirit lacks any realistic likelihood of obtaining regulatory approval, while our company faces a long and bleak limbo period as we await resolution.”
Spirit rejected JetBlue’s allegations on Monday that it gave little consideration toward the JetBlue offer and was largely uncommunicative.
“Spirit shared projections with JetBlue’s financial advisors and provided voluminous documentary due diligence material through a secure virtual data room,” the airline said in its statement. “Spirit’s antitrust advisors spent many hours, involving seven separate calls, with JetBlue’s antitrust advisors seeking to understand the anti-trust risks of the JetBlue proposal and JetBlue’s plans to address those risks.”
JetBlue, which reportedly has been courting large Spirit shareholders to opt in on its offer, did not immediately react Thursday to the Spirit board’s recommendation.
